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Editorial Committee 


Dean, College of Engineering Chairman, Department of Management 
Oklahoma State University Indiana University 


Edited by Fremont A. Shull, Jr., Indiana University 


Revised Edition, by Benjamin W. Niebel, The Pennsylvania State 


Revised Edition, by Franklin G. Moore, University of Michigan 

By Edward H. Bowman and Robert B. Fetter, 
both of Massachusetts Institute of Technology 


By E. S. Roscoe, The Pennsylvania State University 


Third Edition, by Michael J. Jucius, The Ohio State University 


Revised Edition, by Henry M. Cruickshank, Stonehill College 
and Keith Davis, Indiana University 


Revised Edition, by George Filipetti, University of Minnesota 


Edited by William R. Spriegel, University of Texas 
and Clark E. Myers, Ohio University 


Revised Edition, by George R. Terry, Northwestern University 

By William Voris, Los Angeles State College 

SAFETY MANAGEMENT: Accident Cost and Control 
By Rollin H. Simonds, Michigan State University, and 
John V. Grimaldi, General Electric Company 


By Manley Howe Jones, Illinois Institute of Technology 


By Benjamin W. Niebel, The Pennsylvania State University, and 
Edward N. Baldwin, Westinghouse Electric Corporation 

JOB EVALUATION: Text and Cases 

Revised Edition, by John A. Patton, John A. Patton Management 
Engineers, Inc., and C. L. Littlefield, North Texas State College 


Edited by 


Assistant Professor of Management 
School of Business 
Indiana University 






First Printing, July, 1958 

Library of Congress Catalogue Card No. 58-11848 





This set of readings is designed to supplement standard texts in funda- 
mentals of administrative or industrial management. Although the selec- 
tions are arranged to be assigned concurrently with such texts, they might 
well provide the basis for a variable-credit course dealing with specific 
management topics, such as human relations or organization theory. The 
articles could also be used to supplement a case course; for example, prob- 
lems in administration policy and practice. Moreover, these readings should 
prove to be a stimulant and provide controversy for members of executive 
development programs. 

The purpose of this readings text is twofold. First, a real understanding 
of management ultimately requires a professional or artistic orientation. 
Thus, contemporary textbooks emphasize such aspects of the subject, even 
at the expense of examining causal explanations and presenting the logic 
employed in developing specific techniques and concepts. Because of the 
changing nature of utilitarian skills and techniques, progress in the field 
of management rests upon an understanding of its basic foundation. To 
further this objective, many of the selections are drawn from disciplines 
which might be termed the "mother sciences" of management. 

The second purpose of this text is pedagogical in nature. Because of in- 
creasing complexity of student-faculty relationships in colleges and uni- 
versities, it seems necessary to place considerable reliance upon the student 
to seek knowledge independently. If such is the case, instructors must make 
subject-matter readily accessible in some integrated form. These readings 
have been selected with this objective in mind. In addition, the nature of 
the readings will provide a point of departure for classroom discussions. 

The articles which treat new developments offer a recapitulation of the 
advancements to date, and have been chosen because of the clarity of pres- 
entation. The selections dealing with traditional topics were chosen so as 
to present a diversity of view within each section. In addition, they were 
selected to present a particular activity or function in relation to other 
aspects of the management process, and not in isolation. 

Each section is prefaced with editorial continuity to provide a frame- 
work and to emphasize the essence of the articles involved. This continuity 
also integrates the separate sections. Part I is directed toward developing 
an attitude or philosophy of management, and analyzing the basic ap- 
proaches to the subject. Part II considers the activities and functions in- 
volved in the process. Part III presents the requirements and measures of 
managerial performance and concludes with a look to the future and a 
recapitulation of the subject matter. 

Depending upon the needs of the course and the background of the stu- 



dents, some readings can be stressed more than others. The conscious effort 
to gain flexibility permits considerable discretion in this respect. However, 
since no single point of view is taken, the greater the proportion of articles 
read, the more insight and breadth that may be gained. 

In the development of a set of readings, reliance is placed upon the total 
background of the editor — the colleagues, programs, and institutions with 
which he has come in contact. Nonetheless, appreciation is extended to 
Rocco Carzo, Fred Endsley, Edward Morrison, Danilo Orescanin, Thomas 
Sharkey and Jo Frappier who were actively involved in many phases of 
the composition of this text. In addition, sincere gratitude is extended to 
John F. Mee who wrote the Introduction, and who provided an environ- 
ment within which such an undertaking could be pursued. 

Finally, the editor would be remiss not to thank the many copyright 
owners, publishers, and authors, whose kind permission made this book 
possible. Each permission for reprinting is individually acknowledged in 
a citation appearing at the bottom of the title page of each article. 

Fremont A. Shull, Jr. 
Bloomington, Indiana 
May, 1958 


The Society for Advancement of Management presents the subject of 
management as the oldest of the arts and the youngest of the professions. 
It is doubtful that management has achieved the full status of a profession. 
However, there are many "professional managers" among the 4,300,000 
business firms in the United States. A professional manager is one who 
owns little, if any, of the business in which he serves. He is hired or em- 
ployed for his abilities and proficiencies in getting work done through 
others. His skills and knowledge are sought and paid for the same as 
lawyers, engineers, doctors, or other professional people. 

Interest in management philosophy and practice has steadily increased 
during the present century. Since World War II, scholars in business and 
public administration have joined efforts with managers in business and 
government to formulate an acceptable philosophy of management as a 
guide both for modern management practice and for the education of 
those who aspire to careers in the field. The main reasons for the continu- 
ing interest in management philosophy and principles of management 
among educators, public administrators, and progressive businessmen are: 

1. The increasing trend toward decentralization of operating responsibilities 
and decision making in business and governmental organizations. 

2. The increasing numbers of managers required in business and government 
for growth and decentralization of operating units. 

3. The necessity for a logical framework of management philosophy and prac- 
tice as a basis for training in college courses and executive development 

Management philosophy and practices are concerned with the best ways 
and means for achieving desired results through the intelligent use of 
human effort. Management is a process of realizing objectives through the 
guided efforts of men and women. Management is a distinct and profes- 
sional kind of work for which men and women may be trained and devel- 
oped. Experience shows that professional management is concerned with 
separate, measurable, and identifiable proficiencies, based on a body of 
fundamentals and principles, that can be learned and improved. The dis- 
tinct work of professional managers involves: 

1. The consideration and determination of objectives or desired results to be 

2. The ability to solve problems and make decisions in order to set objectives 
and decide upon policies, plans, and procedures to realize the objectives. 

3. Planning the ways and means to achieve the objectives set. 

4. Organizing the work to be done with the people to carry out the plans in the 
work environment. 

5. Motivating or directing the people in the organization to execute the plans. 



6. Measuring the results obtained or controlling activities to assure conform- 
ance with planned actions. 

7. Creative thinking or innovating to realize better products, methods, market- 
ing, human relations, processes, and procedures. 

This book of readings in management brings together concepts, atti- 
tudes, experiences, and viewpoints of some of the modern educators and 
professional managers. The ideas presented may provide others with guid- 
ance in formulating personal management philosophies and attitudes. In 
our economy, the skills of professional managers are needed to utilize the 
fruits of science and technology for the benefits of society. 

John F. Mee 
Bloomington, Indiana 
May, 1958 



A. The Discipline 


1. Management in Schools of Business 

Management Is the Proper Focus of the Business School Curric- 
ulum, Neil H. Jacoby 2 

The Emerging Field of Administration, Charles E. Summer, Jr. 3 

2. The Theory of Management 

Management Science — Fact or Theory? C. West Churchman . . 7 

B. The Nature and Evoution of Management 

1 . Current Historical Survey 

Evolution of a "Science of Managing" in America, Harold F. 
Smiddy and Lionel Naum 10 

2. The Concepts of Management 

The Apologetics of "Managerialism," Edward S. Mason 42 

3. Social Responsibilities of Management 

Ethical Values in Administration, Hurst R. Anderson 54 

C. Approaches to the Study and Practice of Management 

1. General Points of View 

The Generalist in Management, Robert Sessions 62 

Management — The Process, Air Force Manual 68 

2. The Quantitative Approach 

Management Science: The Quantitative Analysis of Manage- 
ment Problems, Robert B. Fetter 71 

Behavioral Management Science, Samuel P. Hayes, Jr 75 

3. The Human Relations Approach 

^— A "New Look" for Management, F. J. Roethlisberger 78 

What Price Human Relations? Malcolm P. McNair 87 

D. The Nature and Dynamics of Objectives 

1. Financial Objectives 

All Decisions Are Financial, Alvin Brown . 100 

^c: 2. The Constellation of Goals 

Aspects of Organization Aims, Ordway Tead 102 




3. The Dynamics of Business Objectives 

Business Objectives and Strategies, Burleigh B. Gardner and 
David G. Moore 109 


A. Planning and Decision Making 

1. The Corporate Personality 

Company Character and the Effectiveness of Personnel Man- 
agement, Robert B. Buchele 116 

Management Policy, John G. Glover 121 

2. Decision Making and Operations Research 

Managerial Decision-Making, Robert Tannenbaum 126 

Operations Research and Its Role in Business Decisions, Robert 
W. Crawford 138 • 

3. Creative Thinking 

The Creative Thinking Process, John F. Mee 150 

4. Game Theory 

The Uses of Game Theory in Management Science, Martin 
Shubik 156 

B. Organizations and Organizing 

1. The Economic Organization 

The Concept of the Firm in the Light of the Theory of Organi- 
zation, Andreas Papandreou 166 

2. Changing Patterns in Organizing 

The General Development in Organization, Charles E. Merriam 174 
Toward a Theory of Industrial Organization, Mason Haire . . . 177 

3. Structural Aspects of Organizing 

A Study of Staff-Line Relationships, Keith Davis 184 

The Span of Control — Fact or Fable, Waino W. Suojanen 190 

4. The Informal Organization 

Informal Organizations and Their Relation to Formal Organi- 
zations, Chester I. Barnard 204 

C. Motivation and Leadership 

V' 1 

1. Worker Interest and Motivation Examined 

Increasing Utilization through Better Management of Human 
Resources, Rensis Likert and Stanley E. Seashore 212 



2. Participative Motivation 

^=The Psychology of Participation, Gordon W. Allport 219 

Participation Management — The Solution to the Human Rela- 
tions Problem? Robert E. Schwab . 228 

3. The Role and Conditions of Leadership 

2— —The Meaning and Identification of Leaders, Herbert A. Simon, 

Donald W. Smithburg, and Victor A. Thompson 231 

^■Conditions of Effective Leadership in the Industrial Organiza- 
tion, Douglas McGregor 236 

4. The Complexity of Leadership 

Leaders and Leadership, J. A. C. Brown 244 

D. Communication and Control 

1. Performance Standards and Formal Communication 

Control and Use of Standards, William H. Newman 255 

Executive Communications: Breaking the Semantic Barrier, 
Stuart Chase 261 

2. Mathematics of Communication and Concepts of Feedback 
Some Recent Contributions, Claude E. Shannon and Warren 

Weaver 268 

Feedback, Arnold Tustin 284 

3. Supervision in Control and Discipline 

Supervision and Control, Marshall E. Dimock 290 

4. The Grapevine 

Making Contructive Use of the Grapevine, Keith Davis 297 


A. Requirements and Measures of Management 

1. Abilities and Skills of Effective Managers 

What Makes Successful and Unsuccessful Executives, Burleigh 

B. Gardner 308 

Skills of an Effective Administrator, Robert L. Katz 322 

2. Current Measures of Management 

Measurement of Management, Phil Carroll 336 

How to Appraise a Management, Jackson Martindell 343 

B. Horizons and Future Requirements 
1. Future Problem Areas 

Research in Management during the '50's, Ralph C. Davis 351 



2. Requirements of Future Managers 

The Manager of Tomorrow, Peter F. Drucker 361 

C. Summary 

1. Management: A General System 

Notes on a General Theory of Administration, Edward H. 
Litchfield 369 

2. A Synthesis of Management 

The Manager Concept: A Rational Synthesis, Robert Tannen- 
baum 389 

Index of Names 401 

Index of Subjects 404 


The Discipline 

Management is becoming an increasingly common subject in schools of 
business. In fact, some authorities suggest that schools of business focus 
their curricula upon management or administration. Jacoby, for example, 
takes such a stand. 

The study of management involves essentially an examination of the 
adjustments required to maintain the internal equilibrium of an organi- 
zation. These adjustments are of two types: Those which are required in 
order to pursue most effectively the raison d'etre of the organization and 
those required to meet most efficiently the maintenance of membership 
requirements. Although other fields of study contribute to and become 
involved, in part, with these problems, management or administration 
appears to be the only discipline singly and totally devoted to this subject 

The study of management as a separate discipline requires that it be 
taught in terms of the fundamentals involved. In this light, management 
may be viewed from two aspects: as a method, largely pragmatic, based 
upon applicable sciences and used in solving basic problems or as a body of 
knowledge from which are developed general laws used to explain cause- 
and-effect relationships. In the article by Churchman, this dichotomy is 
clearly established. 

However approached, management draws from a major proportion of 
the physical and behavioral sciences to solve problems and to accomplish 
ends. That the discipline does draw from many of these sciences, at least 
as taught today, is demonstrated in the study by Summer. This study also 
indicates that most management courses include an objective which is atti- 
tudinal in nature. Thus, the discipline of management in schools-of-busi- 
ness curricula does not have a singular objective. In most instances, the 
purpose of such courses is to offer more than one of the following: (1) a 
framework for understanding the management process, (2) an opportunity 
for developing an attitude toward the broad implications of management 
practices, (3) knowledge of specific management activities, and (4) some 
proficiency in applying such concepts to organized activity. 



Management in Schools of Business 


If I am not mistaken, there is emerging in the United States a general 
recognition that the primary function of a university school of business is 
to educate potential or practicing executives. Of course, the university 
business school also provides education in particular tools or techniques 
used by executives in management, such as accounting, market research, 
security analysis, or motion and time study. But these subjects are coming 
to be viewed as part of, and subsidiary to, the primary purpose of the 
school — which is education for general managerial and administrative re- 
sponsibilities. Its main task is to prepare men and women, insofar as formal 
education can do this, for positions of leadership in business life. The busi- 
ness school must therefore focus its curriculum upon the principles of 
management and administration. These embrace a body of concepts and 
ideas about the organization, staffing, planning, controlling, and leadership 
of business enterprises in a competitive, free-market economy. The evolu- 
tion of courses in what may appropriately be called the field of manage- 
ment theory and policy represents one of the most hopeful and significant 
developments in American schools of business during recent years. 

In carrying out its mission, the university school of business should draw 
upon the theories, concepts, and methods of numerous academic dis- 
ciplines. Because the business executive is an economizer of scarce re- 
sources, the study of economics must be an essential part of his intellectual 
equipment. The executive is an organizer of men, and he should draw 
upon political science for principles governing power relationships and 
organizational structure. The executive is a leader of people, and he 
needs to apply the principles of psychology and sociology in eliciting effort 
from people and managing personnel. The executive is a manipulator of 
machines, methods, and products in a world of rapid technological 
change, and he needs some background information in natural science and 
industrial engineering. The executive is constantly contracting for the 
acquisition or sale of capital funds, equipment, materials, and services, and 
he needs to know the basic elements of law. He is continuously required 
to interpret masses of figures regarding the physical output or financial 

* Neil H. Jacoby, "Economics in the Curricula of Schools of Business," American Eco- 
nomic Review, Vol. XLVI, No. 2 (May, 1956), pp. 554-55. 


results of business operations, so that he needs to be a "shirt-sleeve" statisti- 
cian. With the recent developments of "operations analysis" and high- 
speed electronic computers as aids to executive decision, it will greatly help 
the executive to have a training in mathematics. Finally, the executive 
helps to guide a human enterprise through time, and he needs the per- 
spective that the study of history provides. 


Summary definitions of complex ideas almost never carry true meaning for 
those not already familiar with the detail underlying them. The reader should 
be prepared, in the general views which follow, for a certain amount of frustra- 
tion and lack of understanding, and for a diversity of views among individuals. 

The Field of Administration 

To Dean Jacoby of U.C.L.A., the field includes, "first, a body of hypoth- 
eses, theories, and principles relating to management per se, including 
internal management of the firm, relation of the firm to the external en- 
vironment, and 'human relations' considerations; second, the application 
of theories to practical problems." Dean Bach of Carnegie Institute of 
Technology views the field as "the development of an ability (1) to single 
out those decisions which are important, (2) to make, or get made, intelli- 
gent decisions on the problem or decision area, and (3) to get decisions 
carried out once they are made." 

Dean Stanley F. Teele at Harvard has this to say about the nature of the 
field: "The objective of the Harvard Business School is to train people in 
certain administrative skills (wisdom) as we see them. Administration is 
the determination of wise policies and their successful execution in human 
organizations with the least dislocation of those organizations. Business 
administration is not a science, but an art, though there are perhaps 'little 
traces' of science. The skill or wisdom referred to above has many common 
threads when applied to various functions in a business, or to various in- 
stitutions. The most important of these is a combination of (a) intellectual 
effectiveness in thinking through and analyzing a problem, (b) coming to 
a courageous conclusion as to what ought to be done, and (c) reaching 
a decision as to what in fact will be done or what action will be taken. An- 
other important thread has to do with human relations." 

At the University of Illinois, Dean Paul Green has indicated that ad- 
ministration includes the so-called policy area, and the human relations 

* Charles E. Summer, Jr., Factors in Effective Administration, Graduate School of Busi- 
ness (New York: Columbia University, 1956), pp. 1, 6-7, 113-15, 120-21. 


area. In policy, the administrator is concerned with (a) skill in making 
decisions — with doing a better job of thinking in regard to complex prob- 
lems, (b) integrating his knowledge of the functional areas (sales, pro- 
duction, etc.) of business into wise over-all decisions, and (c) knowledge of 
certain administrative processes which are common to management in all 
functions and types of businesses. In the human relations area, the school 
aims at both a knowledge and understanding of behavior and a skill apply- 
ing this knowledge in practical business problems. 

There Is an Emerging Field of Administration 

If information gathered at the twenty universities covered can be used as 
a guide, there is an emerging "field" of administration. It contains elements 
drawn from many traditional fields of learning — philosophy, psychology, 
sociology, mathematics, economics, and traces from such far-removed fields 
as biology. 

The term "field of administration" is used here in a special sense. Tradi- 
tionally a field implies a systematic body of knowledge. It is an important 
thesis of this report that the field of administration includes not only a 
cluster of knowledge factors, but an equally or more important cluster of 
attitudes and abilities. This should serve as a signal to curriculum planners 
that administrative training cannot be forced into traditional compart- 
ments of the program. For instance, just because "principles of economics" 
and "principles of this or that" have been offered, it does not necessarily 
follow that we must have a "principles of management" course. Particular 
attention will have to be given to which specific courses will accomplish 
the attitude and ability goals, and whether these will be blended into 
"knowledge courses" or included in especially designed advanced courses. 

Administration is related to most of the other courses in "schools of busi- 
ness administration" in two ways: (1) part of it involves an integrational 
effectiveness in dealing with subfunctions — production, marketing, finance, 
personnel, and so on, and (2) another part of it can be superimposed on the 
performance of these functions, or on institutional types (banking, trans- 
portation, retailing). It may also be superimposed upon fields traditionally 
taught in engineering schools — product research and development, manu- 
facturing processes, for example. This is just another way of saying that 
the field of general administration is applicable to various functions and 
business institutions. 

There is some weight of opinion to the effect that administration is also 
applicable to all organizations in which people work together toward a 
purpose — business, government, and non-profit organizations of all types. 

And with certain exceptions noted in the report, there is almost com- 
plete agreement that at least parts of administration are applicable to all 
levels within the organization, from foreman and supervisor to president, 
from police captain to police commissioner. 

That the field of administration is a new one is evidenced by the fact 
that over half of the courses studied have been installed since 1950, and 


about three-fourths since 1945. Perhaps the newest areas or approaches to 
administration are the quantitative control and social responsibility areas. 
As might be expected, almost all of the people interviewed, whose careers 
are in teaching administration, attest to the existence of the field. But an 
even greater weight might be given to the opinions of the deans inter- 
viewed, since most of them are specialists to other fields. 

Factors Other Than Knowledge Are Important 

In the education or training of administrators, we must not only admit 
but emphasize that the objective is not primarily scholarship and knowl- 
edge for the sake of knowledge. Faculties at schools of business have, at 
times, been somewhat sensitive to the feeling of faculties in more tradi- 
tional departments of universities on this score. In Europe, business sub- 
jects have not been generally admitted to the status of university matters, 
and are included in trade schools and technical institutes. 

The truth of the matter is that training of administrators is different 
from classical education. This is because (1) administrators are being 
trained for action as moving causes in society and within their organiza- 
tions; (2) administrators have limited time in which to decide and act — 
they cannot wait for gradual accumulation of "scientific" or "scholarly" 
knowledge. This is also the reason that we might present knowledge frame- 
works that do not meet the scientific tests of proof. While these frameworks 
may be held in low regard by those engaged in the sciences, they are noth- 
ing to be ashamed of. An administrator who is responsible for "making 
things tick" in an organization uses whatever is available and useful. 

All of this means that attitude factors and the intuitive or ability factor 
are equally, if not more important, than knowledge. The things we have 
called art, skill, wisdom, and judgment may well account for more of the 
executive's capability than what we know and can pass on at this stage of 
the field's development. 

The Diversity of Knowledge in Administration 

Another general finding of the study is that there have been important 
advances in analytical, predictive, and methodological knowledge within 
the past few years, and that this has only found its way into the curricula 
of our universities for the most part since 1950. 

There is considerable difference in which combination of knowledge ap- 
proaches various schools include in their curricula. There are also combi- 
national differences between professors. We have identified the following 
broad areas and approaches in this study, all of which overlap slightly: 

Organizational behavior 
The processes of administration 
Quantitative administration 
Social responsibility 
Human relations 
Decision-making methodology 


Within these approaches (except the last), there would also be differences 
as to whether people use one or more of the analytical-predictive-methodo- 
logical kinds of knowledge. 

We might ask, is this not a pretty undesirable chaos? Shouldn't we have 
a large meeting of all concerned and agree on what is right? The answer is 
obviously "no" on two counts — people would not, in fact, agree, nor would 
that be desirable. Diversity is a healthy sign, since creativity comes parceled 
out to different brains in different forms. 

In answer to the question, "What is administration?" the most fruitful 
answer that can be given is, "Read this report; it is an effort to present a 
large and complex field in as condensed fashion as possible." 

The summary definition about to be given is not, therefore, worth very 
much — it ought to be an anti-climax. It is offered not as an improvement 
on what other people have advanced, but a report of this kind should not 
leave it out for two reasons. First, we have created some terminology in the 
report which, if pyramided into a "grand summary" may provide insights 
not available elsewhere. Second, the definition might go part way toward 
eliminating the shading referred to above: 

Administration is the use of a complex body of knowledge, and a complex group 
of attitudes and abilities, so as to provide effectiveness in guiding an efficiency- 
technological-human-social organization toward a group of goals. This "guiding" 

a) the making of structural decisions and plans (plans in advance of behavior) 
based on an integration of efficiency, technological, human and social factors; 

b) taking action in two-way relationships with people as individuals, and peo- 
ple as members of groups, in such a manner that structural decisions and 
behavior of people tend to coincide in reality; and 

c) when time pressure for action dictates that the structural and action phases 
merge into one, responding to the administrative environment or problem 
with attitudes and abilities that influence the environment or problem in the 
direction of highest goals. 

The word "efficiency" is intended in the sense of productivity — respon- 
sibility accomplished, product made, service rendered, with the least use 
of resources. While in business one measure is revenue and profit, the term 
efficiency can apply equally to government or other organizational units. 

A final clarification is offered as a guide to those not too familiar with 
administration. Some years ago there was great attention devoted to the 
efficiency-technological side of management — to the making of plans of 
these types to accomplish the organization's goals. In other words, if this 
report had been written then, instead of specifying in the definition that 
administration is guiding the "efficiency-technological-human-social organ- 
ization," the writer may have specified that it is guiding the "efficiency- 
technological organization." He would have been influenced by the general 
stage of progress in the economic society which, at that time, was blossom- 
ing forth more production-wise relative to other factors. 

Then came a stage of development with great attention to the human 


side of management. This gave rise to the phrase "administration is getting 
things done through people." During this trend, the meaning of the word 
"decisions" got lost in the shuffle, and the writer would have had a difficult 
time in keeping from saying "the guiding of a human organization toward 
a group of goals." Again, he would have been influenced by the general 
stage of progress in the economic society. 

Third, there has never been much attention to the item in our definition 
"toward a group of goals." This has tended to be assumed away. At a num- 
ber of universities, the interviewer was told that at one time there was a 
course in business ethics which generally disappeared sometime in the nine- 
teen thirties. Today, there appears to be some revival of interest in both 
the group of goals and the social aspect of the efficiency-technological-hu- 
man-social organization. 

All of this boils down to one suggestion. It is all right to define adminis- 
tration as "getting results through people," or "making efficient plans," or 
other ways, so long as one does not destroy the holistic idea, and so long 
as one understands the meaning behind his semantics. 

Administration involves a prudent blending of all of the elements in 
this definition. 

The Theory of Management 

One cannot help but be struck by the diversity that characterizes efforts 
to study the management process. If it is true that psychologists like to 
study personality traits in terms of a person's reactions to objects and 
events, they could not choose a better stimulus than management science. 
Some feel it is a technique, some feel it is a branch of mathematics, or of 
mathematical economics, or of the "behavioral sciences," or of consultation 
services, or just so much nonsense. Some feel it is for management (vs. 
labor), some feel it ought to be for the good of mankind — or for the good 
of underpaid professors. 

But this diversity of attitude, which is really characteristic of all fields 
of endeavor, is matched by another and more serious kind of diversity. In 
the management sciences, we have become used to talking about game 
theory, inventory theory, waiting line theory. What we mean by "theory" 
in this context is that if certain assumptions are valid, then such-and-such 

* C. West Churchman, "Management Science — Fact or Theory?" Management Science, 
Vol. II, No. 2 (January, 1956), p. 185. 


conclusions follow. Thus inventory theory is not a set of statements that 
predict how inventories will behave, or even how they should behave in 
actual situations, but is rather a deductive system which becomes useful 
if the assumptions happen to hold. The diversity of attitude on this point 
is reflected in two opposing points of view: that the important problems 
of management science are theoretical, and that the important problems 
are factual. 

Another way of emphasizing this diversity is to argue that if one cannot 
forecast (predict), one does not have a theory, and that forecasting is the 
weakest link in the chain of the management sciences at present. Indeed, 
if one cannot predict one cannot measure, and if one cannot measure, then 
there is no "theory." 

This argument will seem entirely too strong to some. We do "forecast" 
in terms of probability distributions, and we do make measurements in 
terms of "costs." Of course, the management scientist has done all sorts of 
things with the concept of cost which few cost accountants would condone. 
But in the laboratory and outside it in industrial studies, one sees the 
emergence of a cost concept which eventually should revolutionize the 
measurements in managerial policy-making. 

Theory and fact are just two sides of the same coin, but the two sides 
of a coin are different, and this difference will continue to characterize the 
development of management science. 

The Nature and Evolution of Management 

Management is applicable to any group undertaking, and since it per- 
vades all aspects of an organization, it is often confused with the technical 
activities of the group and identified with ownership responsibilities of a 
business firm. The function, however, is conceptually separable from either 
of these activities. It may be considered as that agency which is super- 
imposed upon the technical or operational activities of a group. It is ra- 
tional and purposeful; it gives direction and co-ordination to what other- 
wise might be unrelated and random behavior. Management is designed to 
lend economy and effectiveness to the accomplishment of some end. 

In a business firm, management derives the authority for its activities 
from the right of private property, which is then delegated from specific 
property rights vested in ownership. Mason examines the nature of this 
relationship, giving particular attention to the social role of managers of 
large corporations. Moreover, he offers a foundation for the development 
of an ideology based upon the characteristics of the current social milieu. 
Anderson considers the actions of administrators from an ethical viewpoint. 
In this respect, ethics is viewed as a primary, socially created force in the 
formulation of objectives and means decisions. 

As a discipline and a separate field of inquiry, management is a product 
of modern times. Although the study of management is relatively new, its 
elements are found throughout history. Early emphasis upon management, 
arising from the industrial revolution, were attempts to refine and promote 
the technical issues of production. Current attention is directed toward the 
human factors in industry with attempts to promote group effort and meet 
membership needs. The evolution of the process and its study has led not 
only to the establishment of factual techniques and procedures, but also to 
a body of principles that makes training for professional management 

Management as a purposeful and rational approach to the attainment of 
predetermined goals is deserving of organized study. According to Smiddy 
and Naum there is a true need for a "science of managing," based upon 
principles and classified observations that show cause-and-effect relation- 
ships and allow for generalizations applicable to all organized effort. These 
authors emphasize that the "science of managing" is characterized his- 
torically by research efforts on the part of both scholars and practitioners. 


Current Historical Survey 


Wherever people have gathered to pursue a common and desired end, 
there has been an inevitable necessity to organize minds, hands, materials, 
and the use of time for efficient and contributive work. Man has learned 
that individual and personal rewards derive largely from an harmonious 
combination of individual work and teamwork in a soundly organized 
frame of reference, and thus the core of the history of "Scientific Manage- 
ment" is formed from his search for the techniques of joint but voluntary 
participation while still preserving individual initiative, creative imagi- 
nation, and increasingly productive output. 

Any historical survey, to be of more than passing interest, and to be 
more than a simple chronology of dates and names, needs to seek out the 
philosophical drives which both stimulated and limited the progress of 
such a scientific approach to more rational conception and performance 
of managerial work, that is, of securing results through the organized efforts 
of others. 

While it is important to know when things happened, this knowledge 
only becomes significant and usable when it is understood why things 
happened. This paper, therefore, is intended to outline the gradual histori- 
cal development of the search for the basic principles of a "Science of Man- 
aging," and thus of Scientific Management, rather than to be a simple 
recounting of experiment, methodology, or significant writings in that 


The philosophical sciences, and that dealing with the work of Managing 
is one of them, deal with concepts and abstractions not easily tested or 
proved quantitatively, especially on a current basis, and not readily subject 
to exact delineation, definition, standardization, or measurement. The abil- 
ity to observe, to classify, to synthesize, and to act, are at least partially 

* Harold F. Smiddy and Lionel Naum, "Evolution of a 'Science of Managing' in Amer- 
ica," Management Science, Vol. I, No. 1 (October, 1954), pp. 1-31. The views expressed 
herein do not necessarily represent any policy of the Institute of Management Sciences. 


inhibited by the relationship and reciprocal impact of the observer and his 

The observer deals with the classic study of man, and he deals with one 
of its most complex branches, the seeking of orderly process out of divergent 
wills, unclear or even contradictory objectives, and transient and often un- 
measurable forces. Because each observer is an integral factor in his own 
study, complete objectivity is impossible, and he is often faced with the 
conflict of that which reason tells him must be so and that which emotion 
tells him should be so. 

But, by acceptance of the limitations in method, rather than rejection 
because of the difficulties, cumulative progress has been consistently sought 
and progressively achieved. As a result, a "Management Movement," which 
lived only in the hopes of a relatively few dedicated volunteers as recently 
as only three decades ago, has, as of today, grown irresistably to an organ- 
ized and intensifying world-wide drive and to an increasingly international 
educational force. 

Despite such visible and accelerating progress in so short an historical 
era, the Science of Managing, when compared to the physical sciences, may 
still seem slow in evolution and uncertain in direction. Yet, fairly judged, 
it is neither. 

The apparent slowness has only reflected the normal systemic inertia 
encountered wherever tradition and prejudice guide men's actions and 
wherever there is deliberate observation of cause and effect. Uncertainty 
and delay in such progress has really been the result neither of any lack 
of a true goal nor of unwillingness to follow a just direction, but is, rather, 
the result of a need to consider every avenue of possible study and, by the 
very nature of things, to reject far more than can be accepted. 

What is being sought? Certainly not the solution of isolated problems 
or the rectification of each pressing business or social exigency. That would 
be in the nature of art. Certainly not merely the kind of "progress" deter- 
mined by ability to answer the simple questions: "Will it work?" "Can you 
get by with it?" 

What has been, and still is, sought in all these recurring efforts to define 
and develop a true "Science of Managing" are, rather, those kinds of fun- 
damental principles which are the essential scientific foundation of all 
generalization based on classified observations and which give meaning, 
accuracy, and dependability to formulation of rules of action or policies, 
that, given a particular set of conditions, can be used or applied as guides 
with confidence in their effectiveness. 

In other words, the search of the organized Management Movement and 
of the growing thousands of individual participants, both scholars and 
practitioners, is for principles, distilled out of what is now increasingly 
widely recorded experience in the social sciences, which can be applied to 
any and all situations involving the demands of Leadership by reason and 
persuasion rather than merely by rank or dictation. 


To consider the shop, the office, or even the total business as something 
apart and unique from the more general problem of organizing for accom- 
plishment, is, therefore, to take the short and unproductive view. The 
stubborn refusal of disciples of scientific management to fall into that kind 
of mental trap is itself one of the firm reasons for the growing understand- 
ing and acceptance — locally, nationally, and internationally — that man- 
agement principles can be applied to guidance of all kinds of organized 
efforts and can be a base for Management Education which leads to pro- 
fessional rather than whimsical managerial responsibility. 

How is this "search" being conducted? Essentially, it has gone forward 
on two levels. First, there has been the elemental, "action" group whose 
members will always be necessary to avoid crises, but who rarely have time 
for rigorous thought. They have been putting out fires rather than develop- 
ing methods of fire prevention. At best, they keep the work of the day from 
lagging, and they provide data for the file of experience. 

Second, and most important, are those who, by time and circumstance, 
are determined to find and follow carefully measured paths, distinct though 
not remote from immediate demands. 

Fortunately, this latter group is increasing both in size and influence, 
and in recent years their work has been credited with growth from deep 
roots and not merely from a knowing wave of the hand. It is because such 
men, and women, have boldly and persuasively demonstrated that there 
are basic truths which underlie the study of the relationships of men in 
common effort, and have shown that these truths can be demonstrated, 
applied, and measured, that acceptance of the needed fundamental study 
to develop an accepted "Science of Managing" is being won. 

There are still many who regard the idea and concept of a "Science of 
Managing" as a scholarly diversion, a type of post hoc rationalization that 
is created and dies in the confines of the lecture hall. But, especially in the 
United States, while there have been, to be sure, the theorists and while 
their contributions have been indispensable, there have also been the prac- 
tical men, and more often than not, both theoretical concepts and practical 
applications have found common spokesmen. In the complex organization 
of modern technological society, there has been a necessary division of 
thought and labor, and yet the carefully balanced alloy of the philosopher 
and the practitioner has been the metal for forging the characteristic In- 
dustrial Society of today. 

Although, as Dr. Albert Einstein has pointed out, "We now realize, with 
special clarity, how much in error are those theorists who believe that 
theory comes inductively from experience," 1 the immutable demands of 
science are such that new concepts inevitably bear at least the subjective 
imprint of past experience, and that, inevitably, there must be a com- 
mingling of theory and practice. 

1 Dr. Albert Einstein, Out of My Later Years (New York: Philosophical Library, 1950), 
p. 72. 


In sum, the object and method of the search are clear. They are to estab- 
lish a true Science of Managing based upon a valid, moral, and ethically 
acceptable philosophy of management by the impartial observation of 
social components as discrete entities within and related to a total common 
purpose. The search, especially in business and little less in government, 
has been, and will continue to be, conducted in a climate of reality for: 

Life cannot wait until the sciences may have explained the universe scien- 
tifically. We cannot put off living until we are ready. The most salient character- 
istic of life is its coerciveness: it is always urgent "here and now," without any 
possible postponement. . . . 2 


There have been many definitions of "Scientific Management," or as we 
prefer to phrase it, of a specific "Science of Managing." Mostly, they have 
been reflections of their time and frequently have served the needs of 
brevity more than of understanding. Yet awareness of the need for man- 
aging skills dates back, of course, beyond the beginning of recorded his- 
tory. There are three phases, however, which, at the risk of rather obvious 
over-simplification, can be divided in time. 

Before the nineteenth century, industry and business as we know it today 
were basically craft, individual, or, at best, guild matters. Dominating 
other aspects and counting above other endeavor usually was the organiza- 
tion and pursuit of territorial conquest. The energy of creative leadership 
was devoted in large part to the expansion of geographic horizons and the 
consequent need to discover, to take over, and to govern new territories. 

Thus, there is evidence of "management" in military structures as in the 
conduct of civilian public affairs, but it was a type of management in which 
though over and above the satisfaction of immediate requirements was 
usually of minimum proportions or impact. This era was perhaps the clear- 
est example of management as an art; that is, the application of knowledge 
without systemization, and ordinarily on a definitely personalized basis. 

The second period, on this scale of classification, began in the early part 
of the nineteenth century, following closely upon the heels of the intro- 
duction of the power loom and the steam engine. Here the first clearly 
definitive movement toward understanding the managerial, and even the 
broader social, implications of rapid technological progress was made, al- 
though nearly always in the light of just adequate and immediate solutions. 

The information necessary to establish a true "Science of Managing" 
was still not at hand. The implications of constructive and successful steps 
taken in the direction of sound and rational organization were largely over- 
looked. Controlled experiment, accurate observation, and statistical corre- 
lation of human processes sometimes fell far short of more than lip service. 
Those who had created the industrial revolution, however, were concerned 

Ortega y Gasset, Mission of the University (London: Kegan Paul, 1946), p. 146. 


with the changing world they had brought into being, and the writings 
indicate at least a growing realization of a serious, impending human 

In the last half of the nineteenth century, therefore, they talked hope- 
fully of a "science of management." But, because they dealt only with spe- 
cific fragments of a complex problem, the principles they accepted are seen 
by the broader view of hindsight to have been overly narrow and super- 
ficial; and the science they established was, by today's dimensions at least, 
only a quasi-science. 

A more serious danger inherent in the limited understanding of the nine- 
teenth century mechanists has been pointed out by Professor A. N. White- 

A factory with its machinery, its community of operatives, its social service to 
the general population, its dependence upon organizing and designing genius, its 
potentialities as a source of wealth to the holders of its stock is an organism ex- 
hibiting a variety of vivid, values. What we want to train is the habit of appre- 
hending such an organism in its completeness. It is very arguable that the science 
of political economy, as studied in its first period after the death of Adam Smith 
(1790), did more harm than good. It destroyed many economic fallacies, and taught 
how to think about the economic revolution then in progress. But, it riveted on 
men a certain set of abstractions which were disastrous in their influence on mod- 
ern mentality. It dehumanized industry. 3 

Many historians mark the first decade of the present, or twentieth, cen- 
tury as the beginning of the work of investigating the principles of man- 
agement along lines which provide statistical validity; although even casual 
analysis, especially of papers on cost accounting and on work analyses 
before such bodies as the American Society of Mechanical Engineers, shows 
clearly that the foundation studies for such investigation had been develop- 
ing for at least twenty years previously. 

The examination of work skills in terms of output, which had thus re- 
ceived growing attention in the last quarter of the preceding century, was 
progressively restudied and carried forward with remarkable diligence and 
with increasingly startling results. 

Resources in men and materials were expended in a great surge of dis- 
covery, but, unfortunately, the comparative abundance of the things man 
needed to make, to build, and to expand was in effect an embarrassment 
of riches. In the haste to make mightily, men fell too often into ways of 
leadership by command and by compulsion. The latent power of the peo- 
ple, which Gustave LeBon termed the "psychological law of the mental 
unity of crowds," 4 was accordingly marshalled in a pattern of social re- 
volt, directed at such industrial methods because, while they did produce 
mightily, they tended to distribute inequitably and to make advances with 
inadequate regard for human developments. 

3 A. N. Whitehead, Science and the Modern World (New York: Macmillan Co., 1925). 

4 Gustave LeBon, The Crowd (London: Ernest Benn Ltd., 1952), p. 24. 


Students of social status, customs, and trends became concerned with the 
creation, maintenance, and growth of the business, and specifically of the 
industrial enterprise as perhaps the most significant of current social phe- 
nomena. They realized, at last, that the total equation of civilization was 
heavily, perhaps even dominantly, affected by its business and industrial 

It is within the last forty years, in consequence, that we have at last 
turned our primary, rather than our incidental, attention from the man, 
the machine, the product, to total enterprise, and even to Industrial So- 
ciety, as an entity. 

Those concerned with the Science of Managing are going back, now, 
over the accumulated knowledge and experience of centuries with new atti- 
tudes to discover the basic principles and patterns "which, like the great 
religions of the world, have the power to arouse the faith and hold the 
support of the great body of individual men and women throughout the 


The birth of the organized movement in search of a rational and cohesive 
science of management is generally credited to Frederick Winslow Taylor. 5 
His book, The Principles of Scientific Management, published in 1911, and 
synthesizing and advancing the theses developed in his earlier experiments 
and writings from around 18$0 to that time, seriously upset many tradi- 
tional concepts of management. 

It is interesting to study Taylor's development as, in the course of a long 
and productive life, both as a practitioner and engineer in and as a writer 
on the work of Managing, his attention and emphasis shifted from the ex- 
ploration of discrete facets of industrial processes to a search for underlying 
principles which governed the operation of those processes. It is, in a sense, 
the condensed pattern of the development of a real management science. 

Taylor was born in 1856 and, after a rather cursory education, became 
apprenticed to the Enterprise Hydraulic Works in Philadelphia in 1874. 
He became concerned with the serious gap between the potential output 
and the actual output of shop workers and when he became a foreman, he 
determined to study the means of increasing productivity. 

5 References in this paper to individual practitioners and writers on Scientific Man- 
agement are solely to indicate by example the progression of ideas that developed with 
changing times. This paper is not an attempt to mention systematically even the out- 
standing pioneers of the "Management Movement." For a systematic listing of such pio- 
neers, and for a comprehensive presentation of their contributions, see the forthcoming 
Golden Book of Management, prepared by CIOS, the Comite International de reorganiza- 
tion Scientifique, with headquarters at Geneva, Switzerland, which now represents the 
organized management societies of some twenty-four free nations at the international 
level. Any attempt to list even the leading current authorities in the field would simply 
require another large book in itself. 


His early attempts were penetrating studies of the machine as a unit of 
productivity. Carefully controlled experiments were made on metal cutting 
techniques at Bethlehem Steel, at first alone and later with the aid of such 
associates as Carl Barth, Henry Gantt, and William Sellers. Every con- 
ceivable variation in speed, feed, depth of cut, and kind of tool was made 
and an empirical understanding of optimum combinations was established. 
And, in parallel with these empirical advances, it is significant that Taylor 
also sought the aid of able mathematicians of the day to find theoretical 
explanations and formulas from the abundant data with its complex and 
baffling variables, which their work amassed. 

Encouraged by the success of the metal cutting work, Taylor made many 
other studies which dealt with the techniques of production. His work, 
during this period, was characterized primarily by his concern with end 
results, yet also by significant parallel attempts to deduce basic meanings. 
However, just as the metal cutting experiments dealt with what was hap- 
pening more than why it happened, he failed, for the moment, to perceive 
the full general implications of his studies as an example of one of the 
elemental processes of scientific management. 

Paralleling Taylor's and other early explorations, Frank and Lillian 
Gilbreth undertook a remarkable series of studies, which were distin- 
guished by the fact that they definitely recognized and recorded with per- 
suasive clarity that the basic unit of productivity had to include the worker 
as well as the machine and on a quantitative and specific basis. In 1909, for 
example, they published a work entitled A Bricklaying System and, in 191 1, 
followed it with the more comprehensive Motion Study. 

Their work, while of tremendous importance in creating an understand- 
ing of motion economy, of the techniques of increasing output by reducing 
incremental effort, and of the tools of measurement, is of deeper and more 
lasting importance in that it showed the significance of integrated think- 
ing. They found and preached for all to know that it was the optimum 
combination of worker skills and machine operation, rather than the best 
of either alone, that could narrow the gap between potential and realized 

The full import of the contribution of the industrial psychologist was 
not at first recognized. In reviewing the history of the American manage- 
ment movement, Colonel Lyndall F. Urwick gave this warm evaluation of 
the Gilbreth team: 

If they (the ASME) had not been (aware of human problems involved) — and 
Taylor either failed to encounter, or to recognize the significance of, the early 
work in industrial psychology contributed by Walter Dill Scott, Hugo Munster- 
berg, and others — there was the amazing fact that one of them, Frank Bunker 
Gilbreth, happened to fall in love with a girl who was a psychologist by educa- 
tion, a teacher by profession, and a mother by vocation. I know of no occurrence 
in the whole history of human thought more worthy of the epithet "providential" 
than that fact. Here were three engineers — Taylor, Gantt, and Gilbreth — strug- 
gling to realize the wider implications of their technique, in travail with a "mental 


revolution," their great danger that they might not appreciate the difference be- 
tween applying scientific thinking to material things and to human beings, and 
one of them married Lillian Moller, a woman who by training, by instinct, and by 
experience was deeply aware of human beings, the perfect mental complement in 
the work to which they had set their hands. 6 

As such work and that of many other pioneers progressed steadily, as is 
significant that Taylor, too, increasingly appreciated the fuller meanings 
of his work, and out of such developing awareness he offered this concept 
of "the manager" in The Principles of Scientific Management: 

These new duties of the manager are grouped under four heads: 

1. They develop a science for each element of man's work, which replaces the 
old rule-of-thumb method. 

2. They scientifically select and then train, teach, and develop the workman, 
whereas in the past he chose his own work and trained himself the best he 

3. They heartily cooperate with the men so as to insure all the work being done 
in accordance with the principles of the science which have been developed. 

4. There is an almost equal division of the work between the management and 
the workmen. The management takes over all work for which it is better 
fitted than the workmen, while in the past almost all of the work and the 
greater part of the responsibility were thrown upon the men. 

and, in that same treatise, he ably summarized the powerful concepts which 
he had evolved and clarified in his more than thirty-five years of resource- 
ful, persistent, and classified studies in these memorable words: 

The writer is one of those who believes that more and more will the third party 
(the whole people), as it becomes acquainted with the true facts, insist that justice 
shall be done to all three parties (employer, employee, public). It will demand the 
largest efficiency from both employers and employees. It will no longer tolerate 
the type of employer who has his eye on dividends alone, who refuses to do his 
full share of the work and who merely cracks the whip over the heads of his 
workmen and attempts to drive them into harder work for low pay. No more will 
it tolerate tyranny on the part of labor which demands one increase after another 
in pay and shorter hours, while at the same time it becomes less, instead of more, 

And the means which the writer firmly believes will be adopted to bring about, 
first, efficiency both in employer and employee, and then an equitable division of 
the profits of their joint efforts, will be scientific management, which has for its 
sole aim the attainment of justice for all three parties through impartial scientific 
investigation of all the elements of the problem. For a time both sides will rebel 
against this advance. The workers will resent any interference with their old rule- 
of-thumb methods, and the management will resent being asked to take on new 
duties and burdens; but in the end the people, through enlightened public opin- 
ion, will force the new order of things upon both employer and employee. 

. . . Scientific management does not necessarily involve any great invention, nor 
the discovery of new or startling facts. It does, however, involve a certain combi- 
nation of elements which have not existed in the past, namely, old knowledge so 
collected, analyzed, grouped and classified into laws and rules that it constitutes 

6 Colonel Lyndall F. Urwick, Management's Debt to the Engineers, The ASME Calvin 
W. Rice Lecture. 


a science; accompanied by complete change in the mental attitude of the work- 
ing men as well as of those on the side of management, toward each other, and 
toward their respective duties and responsibilities. Also a new division of the duties 
between the two sides and intimate, friendly cooperation to an extent that is im- 
possible under the philosophy of the old management. . . ; 

It is no single element, but rather this whole combination, that constitutes scien- 
tific management, which may be summarized as: 

Science, not rule-of-thumb 
Harmony, not discord 
Cooperation, not individualism 
Maximum output, in place of restricted output 
The development of each man to his greatest 
efficiency and prosperity 

The time is fast going by for the great personal or individual achievement of 
any one man standing alone and without the help of those around him. And the 
time is coming when all great things will be done by that type of cooperation in 
which each man performs the function for which he is best suited, each man pre- 
serves his own individuality and is supreme in his particular function, and each 
man at the same time loses none of his originality and proper personal initiative, 
and yet is controlled by and must work harmoniously with many other men. 

Both Taylor and the Gilbreths had thus restated, and indeed proved, 
two basic concepts which set the pattern of the industrial revolution over 
a hundred years before. Adam Smith in Wealth of Nations, 1776, suggested 
the principle of the division of labor: 

This great increase of the quantity of work which, in consequence of the division 
of labor, the same number of people are capable of performing, is owing to three 
different circumstances; first, to the increase of dexterity in every particular work- 
man; second, to the saving of the time which is commonly lost in passing from 
one species of work to another; and lastly, to the invention of a great number of 
machines which facilitate and abridge labor, and enable one man to do the work 
of many. 

This, of course, was the historical precedent of the work in the early 1900's 
which was concerned with the organization of production skills and which 
has since been extended and enlarged by the contributions of Engstrom, 
Maynard, Segur, and many others in this country and by fellow scholars 
and practitioners in these fields abroad. 

Charles Babbage, British mathematician and scholar, provided the sec- 
ond governing concept of transference of skill in his Economy of Machinery 
and Manufacture, published in 1832: 

That the master manufacturer, by dividing the work to be executed into differ- 
ent processes, each requiring different degrees of skill and force, can purchase ex- 
actly that precise quantity of both which is necessary for each process; whereas, if 
the whole work were executed by one workman, that person must possess sufficient 
skill to perform the most difficult, and sufficient strength to execute the most 
laborious, of the operations into which the art is divided. 

It is interesting to compare the statements of Babbage and Taylor. Super- 
ficially, they seem to say much of the same; actually, Taylor's four prin- 
ciples of managing introduced the means by which Babbage's "transference 


of skill" might be accomplished. While many still think of Taylor as a 
seeker of cold efficiency, the true scope of his work is more accurately en- 
visioned in this prefatory summation of his 1911 book: 

The principal object of management should be to secure the maximum pros- 
perity for the employer, coupled with the maximum prosperity for each employee. 

The words "maximum prosperity" are used, in their broad sense, to mean not 
only large dividends for the company or owner, but the development of every 
branch of the business to its highest state of excellence, so that the prosperity may 
be permanent. 

In the same way maximum prosperity for each employee means not only higher 
wages than are usually received by men of his class, but, of more importance, it 
also means the development of each man to his state of maximum efficiency, so 
that he may be able to do, generally speaking, the highest grade of work for which 
his natural abilities fit him, and it further means giving him, when possible, this 
class of work to do. . . . 

The majority of these men (employers and employees) believe that the funda- 
mental interests of employees and employers are necessarily antagonistic. Scientific 
management, on the contrary, has for its very foundation the firm conviction that 
the true interests of the two are one and the same; that prosperity for the employer 
cannot exist through a long term of years unless it is accompanied by prosperity 
for the employee, and vice versa; and that it is possible to give the workman what 
he wants — a low labor cost — for his manufactures. 7 

Another milestone of considerable stimulative value was passed in con- 
nection with the testimony of Harrington Emerson and other engineers 
before the Interstate Commerce Commission. In October of 1910, Louis D. 
Brandeis and Henry L. Gantt brought together a group of engineers to 
choose the most suitable designation for the new philosophy of manage- 

Mr. Brandeis was the principal attorney of freight shippers who were 
fighting the imposition of railroad rate increases. The essence of his strategy 
was to prove by competent testimony that a method existed whereby the 
railroads could not only reduce rates but could, at the same time, reduce 
costs and increase wages. He realized that the case would be strengthened 
if all his witnesses called the same things by the same names and would 
agree on a single name to designate the system of management they repre- 

Mr. Emerson pointed out, under careful questioning by Mr. Brandeis, 
that the railroads of America could save at least a million dollars a day by 
the application of scientific principles to the operation of their business. 
Sudden realization among business leaders everywhere that the then proud- 
est industrial achievement, the system of railroads, was actually something 
less than the flawless gem of American enterprise, brought at last the 
needed widespread attention and support the management movement had 
lacked and gave the newly chosen name, Scientific Management, an official 

7 Frederick W. Taylor, The Principles of Scientific Management, 1911, pp. 9-10. 


A conference of some three hundred businessmen, consultants, and edu- 
cators was called in 1912 at Tuck School at Dartmouth to discuss the pos- 
sible courses of action uncovered by such new avenues of management 
thinking. The deliberations of these historic sessions, powerfully preserved 
by Harlow Persons, are considered by many scholars to mark the "Char- 
ter" of an organized "Management Movement" in this country within 
which to progress and cumulate individual contributions in a meaningful 

Almost overnight, "Scientific Management" became a matter of public 
concern and open debate. As so often happens, however, enthusiasm out- 
ran understanding. Although resistance to excesses was prompt, the "effi- 
ciency expert" became the apostle of exploitation in the eyes of the great 
body of labor, rather than a leader for mutual progress and agreement. 

Among management people themselves there was still a further dissimi- 
larity of enthusiasm, reflecting that human nature is the common charac- 
teristic of both the managerial and the individual worker. Traditionalists 
regarded the work of the management investigators as so much pap and 
set out on an active de-bunking movement, rooted in an attempt to main- 
tain the only ways of work they could or wanted to understand. Progressives 
refused the challenge of a pointless battle and began to re-evaluate their 
responsibilities as managers. 

Contrast these two answers to a survey conducted by the American So- 
ciety of Mechanical Engineers and quoted in the first of that Association's 
Ten Year Progress in Management Reports, published in 1912, which from 
1912 to 1932 were under the distinguished guidance of L.P. Alford. In re- 
sponse to a request for a definition of the new element in the art of manage- 
ment, the traditionalist viewpoint held: 

I am not aware that a new element in the art of management has been dis- 
covered. . . . 

There have been no new discoveries in scientific management of industrial in- 
stitutions. Common-sense men have used common-sense methods always. The term 
"scientific management" is a catch-word which assumes that industrial institutions 
have not been scientifically managed — which is not the case. My experience and 
the experience of my friends has been that there has been no new element injected 
into the art of management. 

In the writer's opinion there is very little that is new about it (the art of man- 
agement). There is hardly any part of it that has not been practiced by managers 
for the past 100 years. The trouble is there are not enough managers with sufficient 
initiative to set the system moving properly. 

. . . the problem presented is not the adoption of something entirely new; but 
rather the extension to every detail of our work of something which we have 
already tried. 

This was the classic pattern of the resistance. The writer made categorical 
admission of two basic hazards in the path of industrial development — the 
lack of adequately trained and inspired managers and the need for the ex- 
tension of scientific method to the over-all enterprise. He offered neither 


solution nor alternative and apparently was willing to believe that the 
changing nature of management was a fictitious academic dream. 

The ASME Committee, with J. M. Dodge as Chairman and Alford, him- 
self, as Secretary, rejected this concept of "impossibility" and selected from 
among the many favorable responses one which seemed best to convey the 
nature of the then so-new "science": 

The best designation of the new element I believe to be "scientific manage- 
ment." This term already has been adopted quite generally and although fre- 
quently misused, carries with it the fundamental idea that the management of 
labor is a process requiring thorough analytical treatment and involving scientific 
as opposed to "rule-of- thumb" methods. 

The writer ventures to define the new element briefly, but broadly, as: The 
critical observation, accurate description, analysis, and classification of all indus- 
trial and business phenomena of a recurring nature, including all forms of co- 
operative human effort and the systematic application of the resulting records to 
secure the most economical and efficient production and regulation of future phe- 

Stripped of technicalities the method of the modern efficiency engineer is simply 
this: First, to analyze and study each piece of work before it is performed; second, 
to decide how it can be done with a minimum of wasted motion and energy; third, 
to instruct the workman so that he may do the work in the manner selected as 
most efficient. 

The Taylor System is not a method of pay, specific ruling of account books, not 
the use of high-speed steel. It is simply an honest, intelligent effort to arrive at the 
absolute control in every department; to let tabulated and unimpeachable fact 
take the place of individual opinion; to develop "team play" to its highest possi- 

As we conceive it, scientific management consists in the conscious application of 
the laws inherent in the practice of successful managers and in the laws of science 
in general. It has been called management engineering, which seems more fully 
to cover its general scope than a science. 

The 1912 (ASME) Progress Report continues in reference to this second 

These quotations convey the ideas of a conscious effort to ascertain and study 
facts and systematically to apply them in instructing the workmen and in con- 
trolling every department of industry. Setting these against the underlying prin- 
ciple of the transference of skill, we conceive the prominent element in present- 
day industrial management to be: The mental attitude that consciously applies 
the transference of skill to all the activities of industry. 

The work of the committee, advanced and comprehensive though it then 
was, of course still fell short of a full appreciation of the basic nature of 
scientific management. They rejected as inaccurate and muddled a sug- 
gested approach to a specific means of putting into practice the "attitude 
that consciously applies the transference of skill." In the light of present 
theory and practice, however, this statement by an unnamed correspondent 
of the Committee is neither fatally inaccurate nor particularly muddled in 
conceptual understanding, even though the "functional foreman" concept 
which was advocated to permit specialization in skills, has since been found 


to be less desirable than the single foreman backed and aided by functional 
staff specialists: 

The regulative principles of management along scientific lines include four im- 
portant elements: 

a) Planning of the processes and operations in detail by a special department 
organized for this purpose. 

b) Functional organization by which each man superintending the workman is 
responsible for a single line of effort. This is distinctly opposed to the older 
type of military organization, where every man in the management is given 
a combination of executive, legislative and judicial functions. 

c) Training the worker so as to require him to do each job in what has been 
found to be the best method of operation. 

d) Equable payment of the workers based on quantity and quality of output of 
each individual. This involves scientific analysis of each operation to deter- 
mine the proper time that should be required for its accomplishment and 
also high payment for the worker who obtains the object sought. 

As a result of the interest in the railroad rate cases, of the Dartmouth 
meeting, and of the generally increased attention of engineers and the 
public, 1912 and 1913 saw the formation of many new associations. Most 
of them, at the time, were essentially either splinter groups broken off from 
the basic ASM E body or else newly organized as a result of somewhat dif- 
ferent objectives or the desire of specialists to emphasize special facets of 
the movement. 

One of the most important of these new societies was also one of the most 
short lived. It was important because it numbered among its members of 
record that kind of mixture of outstanding industrial executives and busi- 
ness managers, as well as management scholars, theorists, educators, econo- 
mists, and publicists, which has allowed theory and practice to crossfertilize 
each other as the American Industrial Society has evolved. Its name, the 
Efficiency Society, was unfortunate since the word "efficiency" had begun 
to have a rather caustic effect on the public. Its reasons for failure were, 
however, somewhat more fundamental. Charles Buxton Going, Managing 
Editor of Engineer Magazine, in outlining the purposes and objectives of 
the Society wrote: 

The essence of the Efficiency Movement is insistence upon a determination of 
standards of achievement — equitable and reasonable standards by which the ratio 
of useful result secured to the effort expended, or the expense incurred in any 
given case, may be compared with the ratio that should exist in a normal utiliza- 
tion of the agencies at hand. Efficiency does not demand nor even encourage 
strenuousness. It does not impose nor even countenance parsimony. It merely de- 
mands equivalence, equivalence between power supplied and work performed; 
equivalence between natural resources utilized and products obtained; equivalence 
between vital opportunity and individual or national health; equivalence be- 
tween attainable degrees of security and the actual proportion of casualties; equi- 
valence between production capacity and finished product. 8 

8 Charles Buxton Going, The Efficiency Movement, An Outline, Efficiency Society, Inc., 
transactions, 1912, Vol. I, p. 13. 


One can hardly take issue with the "insistence" or the "demands." Cer- 
tainly they are only objectives which are approachable and beneficial to 

Yet, there is an air of coldness and of compulsion about this statement 
which could hardly be expected to win understanding or reduce antagon- 
ism. What seemed to be essentially lacking was an adequate awareness that 
the man at the machine might value and protect his own conception of 
his own dignity — that in the last analysis any hope for a more efficient 
world would necessarily have to depend on making the worker aware and 
voluntarily appreciative of the fact that although his objectives and those 
of the enterprise might normally be different, both sets of objectives could 
only be achieved together; that is, that their desires were not mutually ex- 
clusive, merely different. 

Requoting Taylor on this point: "Scientific Management, on the con- 
trary, has for its very foundation the firm conviction that the true interests 
of the two are one and the same. . . ." 9 Although, of course, Taylor gen- 
eralized — the "true interest" often being overshadowed by the apparent 
interest — he clearly appreciated the nature and magnitude of the human 

So, also, did others. A. Hamilton Church and L. P. Alford, for example, 

Some of the conditions of personal effectiveness are these: The individual must 
feel leadership; have adequate encouragement and reward; be physically fit and 
under good physical conditions; and receive a definite allotment of responsibility. 

These conditions apply not only to the operative force but to all grades of em- 
ployees. In fact, some of them apply with greater urgency to the man 'higher-up' 
than to the actual worker. 

The truth is, of course, that no single element of a system, or even a combination 
of half a dozen of such elements . . . more than touch the fringe of the questions. 
Highly organized systems may coexist with fine esprit de corps but the latter is 
not dependent on any form of system or organization. 

Of all the conditions controlling a fine working atmosphere, leadership prob- 
ably plays the most important part. . . . The weakness of one prominent school 
of management doctrine is that it pretends that it has superseded leadership by 
substituting therefor elaborate mechanism. Such a contention betrays a complete 
misapprehension of how men are constituted and of what the true functions of 
elaborate mechanisms really are. All such mechanism is but a collection of mechani- 
cal tentacles or feelers to enable the controlling mind and spirit of the manage- 
ment to be in several places at once. If personality behind these tentacles is a 
feeble one, the mechanism will not supplement its deficiencies in the slightest 
degree. 10 

This was the visionary concept which, in the hands of those who were 
to carry on the work, has been embellished and amplified as one of the 
basic tenets of the "Science of Managing." 

9 Taylor, op. cit., p. 9. 

10 A. Hamilton Church and L. P. Alford, "The Principles of Management," American 
Machinist, May 30, 1912. 


It found expression in the formation of such associations as The Society 
to Promote the Science of Management and the National Association of 
Corporation Schools, the latter group devoted primarily to the problems of 
training in industry. Somewhat later, in 1917, the growing interest in con- 
nection with war work led to the formation of the Society of Industrial 

Soundly conceived, these organizations grew in prestige over the years. 
The first and third eventually became the present Society for the Advance- 
ment of Management, and the second, also after mergers with others, be- 
came the present American Management Association. 

In reviewing the rise and fall of various management organizations, a 
possible key to their success or failure may be found in the answers to Pro- 
fessor Dwight Waldo's questions: 

Are students of administration trying to solve the problem of human coopera- 
tion on too low a plane? Have they, by the double process of regarding more and 
more formal data over a wider and wider field of human organization, lost in- 
sight, penetration? Is formal analysis of organizations without regard to the pur- 
poses that inspire them but a tedious elaboration of the insignificant? 11 

Where the sights have been properly set, and the objectives honestly de- 
rived from the inherent obligations imposed on the work by the needs of 
society in general, and of individual human beings in particular, manage- 
ment associations have flourished. They are accepted now as a necessary 
and desirable professional component of our technological Industrial So- 
ciety and are progressively expanding their contributions based on their 
sound foundation. 


The years between 1912 and 1922, the date of Alford's second ASME 
Progress Report, were years of international unrest and of world-wide war. 
Demands on current material and human resources had required almost 
the total attention of management thinking, and the theoretical aspects of 
the report were, therefore, very nearly restatements of the 1912 Report. 
Practically, however, it was an era of great advances, since the unprece- 
dented demands of the war effort required the application of every organ- 
izational and functional skill at hand. 

One of the characteristics of a science, the alternate play and shifting 
dominance of theory and practice as demanded by necessity, then became 
evident in the Science of Managing. 

If it is possible to assess against one man the stimulation for making the 
theoretics of management into working realities during World War I, such 
appraisal would undoubtedly point to Bernard Baruch. Both in the specific 
structure of his War Industries Board, as it was finally constituted in 1918, 

Dwight Waldo, The Administrative State (New York: Ronald Press Co.), p. 211. 


and in substituting centralized and authoritative governmental planning 
for the free market and the law of supply and demand which in effect en- 
forced efficient managerial attitudes by such devices as rigid priorities, fixed 
prices, and absolute schedules, he gave industry little choice but to stream- 
line and clean house or to fail. Heavy production schedules and severely 
limited profits thus practically forced these industry leaders, who had not 
done so through foresight and conviction, to turn to scientific management 
as a means of survival. 

Baruch seemed peculiarly gifted in his ability to look at the mobilization 
effort as essentially an economic proposition. He demanded, and finally re- 
ceived, authority to make decisions and enforce them over the total field 
of supply and demand of not only the materials of war itself, but over the 
total economy. Most importantly, however, he substantially avoided the in- 
herent dictatorial dangers of such a concentration of power by delegating 
his authority to subordinates in order to put decision-making in the hands 
of experienced economic and industrial experts who were close to the scene 
of action. 

Out of the chaos of the 1914-1917 period, a time when the President's 
Advisory Commission was in the untenable position of being asked to make 
decisions but prevented by charter from enforcing the decisions, the United 
States thus finally achieved the integration of its aims and its capabilities, 
aided, of course, by that terrible but effective commonness of purpose and 
spirit which the fires of War so rapidly forged. How it was done is summed 
up by James Tyson in these words: 

The great principle followed throughout the Board's dealing with industry was 
that of voluntary cooperation with the big stick in the closet. The biggest problem 
was to increase production so as to raise the output of industry up somewhere 
nearer the tremendous demands of the government. For this reason it was neces- 
sary to give business every encouragement, by allowing a margin of profit and also 
by attempting to arrive at an agreement with each trade before imposing con- 
servation or other regulations. . . . From the time of his early attempts to bring 
producers together ... he (Baruch) followed this policy of close alliance rather 
than one of arbitrary control. 

Perhaps no better appraisal of the final forms of this cooperating could be found 
than the observation of Paul Von Hindenburg in his memoirs, when he said of 
American Industry: "Her brilliant, if pitiless, war industry had entered the service 
of patriotism and had not failed it. Under the compulsion of military necessity 
a ruthless autocracy was at work and rightly, even in this land at the portals of 
which the Statue of Liberty flashes its blinding light across the sea. They under- 
stood war!" 12 

The principles of leadership include of necessity an understanding of 
the limitations of those who are led. 

Whether these limitations are the result of tradition, of prejudice, or of 
apathy, they exist and have to be dealt with in an atmosphere of reality. 

12 James L. Tyson, "The War Industries Board, 1917-18," Supplement to Fortune, 
September, 1940, p. 16. 


That not every man wants to be or is capable of being captain of his own 
ship was demonstrated in the attempts of Edward and Lincoln Filene, who 
were both early theorists and early practitioners of scientific management, 
to put their famous Boston department store on a cooperative basis. 

Edward Filene, described by one of his associates as an "ingenuous and 
ingenious idealist" embarked on a program in 1912 which, in the cold light 
of hindsight, was as noted for its impracticality as it was for its humanity. 
He and his brother tried desperately to encourage the interest and active 
participation of the workers in the enterprise by establishing a Cooperative 
Association together with plans for the eventual transfer of all stock to 
employees. Indifference toward the exercise of power and resistance toward 
assuming responsibility for their own corporate destiny on the part of the 
workers was so startlingly apparent that Lincoln Steffens facetiously sug- 
gested that Filene might have to hire some agitators to put his program 

The effort to put the enterprise in the hands of the workers continued 
unsuccessfully for more than ten years. It failed, not because of basic viola- 
tions of ethical standards or of public and employee interests, but because 
of the failure of the Filenes to establish a system of communication with 
their employees which would allow them to determine the employees' con- 
cept of the manager's and worker's common interests. 

The failure, a personal disaster for Edward Filene, made nevertheless 
two significant contributions to the business community. It showed, that 
managing is a mantle of responsibility not willingly accepted by all people. 
Moreover, it demonstrated the fundamental need for thorough and undis- 
torted study of all the facets of a problem. Thus, it highlighted, for man- 
agement theorists and practitioners, the importances of these three elements 
of business managerial thinking: Thinking ahead, thinking through, and 
thinking whole. 


The awakening of the true nature of the modern American leadership 
process came about in the period following World War I. Now, at last, 
acute realization of the closely geared relationship of the business enter- 
prise as an integral part of, and at the same time as a significant contributor 
to a general pattern of social development, was broadly achieved. 

The story of this awakening in industry is, in large part, vividly reported 
in the gifted observations and writings of Mary Parker Follett. Her papers 
and lectures covering some thirty years of uniquely contributive observa- 
tion are remarkable both for their breadth of application and for the pene- 
trating understanding of motive and need. 

She realized that the true quality of modern business Leadership stems 
from the appreciation of the basic needs and aspirations and of the mutual 
dependence of men in a complex social organism. Throughout her long 


career Miss Follett was fortunate in having the friendship and advice of the 
many industry and business leaders, including especially many in the man- 
agement of the New England Telephone and Telegraph Company, who 
shared with her the benefit of their experience, and for whom she was able 
to express the meaning and import of their work. Her relationships with 
the telephone system were especially fortunate because the gifted early 
managerial work of Theodore Vail, president of the parent company in the 
Bell System, had provided an environment of management by well-defined 
and far-seeing policies within a clearly designed functional organization 
structure that has in essence survived to this day and that was peculiarly 
appropriate for her perceptive observation and advice. 

Mary Follett received her formal education at Radcliffe College. Her 
work there and her subsequent contributions earned her a place among 
the College's fifty most distinguished graduates. Metcalf and Urwick, in 
their collection of her papers, Dynamic Administration, attempted to de- 
fine the special quality of her attitudes which gave her work such signifi- 
cance. It is repeated here because it is, in a way, the definition of a rare 
managerial trait: 

Mary Follett's outstanding characteristic was a facility for winning the con- 
fidence and esteem of those with whom she came in contact; she established a 
deeply-rooted understanding and friendship with a wide circle of eminent men and 
women on both sides of the Atlantic. The root of this social gift was her vivid 
interest in life. Every individual's experience, his relations with others and with 
the social groups — large or small — of which he was a part, were the food for her 
thought. She listened with alert and kindly attention; she discussed problems in a 
temper which drew the best out of the individual with whom she was talking. 
The strength of the personal associations she thus built up were remarkable. 

Miss Follett progressed from community activities to social work, and 
from there to vocational guidance and finally to business and industrial 
organization. In the latter work she drew heavily upon her experience in 
practical psychology, and her lectures and papers were strongly woven with 
the threads of understanding and sympathy. Her philosophy was, of course, 
the synthesis of the studies of many people concerned with the theory of 

In the meantime, Mrs. Gilbreth, like many others prominent in the his- 
tory of the management movement, continued her analysis of industrial 
problems, delineating specific worker and manager attributes which con- 
tributed to the balance of the business economy. At the same time compre- 
hensive full-length books began to supplement the shorter conference-type 
papers as the building blocks of the literature of Management. Thus, such 
volumes as Mooney and Reiley's Onward Industry, and later their Prin- 
ciples of Organization, Fayol's Industrial and General Administration, 
Barnard's The Functions of the Executive, and Brown's Industrial Organ- 
ization typify the magnitude and scope of the source material to which Miss 
Follett added her own observation and imagination. It is noteworthy also 
that these writers were practicing industrialists, two from General Motors, 


one from the mining industry, one from the Bell Telephone System, and 
the last from the Johns-Manville Corporation. 

Such writings and those of many other leading industrialists, consultants, 
and educators afforded a firm base for the present comprehensive literature 
in this field. Thus, the following brief quotations from the Follett papers 
are, in fact, representative of the creative outpouring of an era rather than 
of a single person: 

On conflict: 

As conflict — difference — is here in the world, as we cannot avoid it, we should, 
I think, use it. Instead of condemning it, we should set it to work for us. . . . 
There are three main ways of dealing with conflict: domination, compromise, and 
integration. Domination, obviously, is a victory of one side over the other. This is 
the easiest way of dealing with conflict, the easiest for the moment but not usually 
successful in the long run. 

The second way of dealing with conflict, that of compromise, we understand 
well, for it is the way we settle most of our controversies. . . . Yet no one really 
wants to compromise, because that means a giving up of something. Is there then 
any other method of ending conflict? There is a way beginning now to be recog- 
nized at least and occasionally followed: when two desires are integrated, that 
means that a solution has been found in which both desires have found a place, 
that neither side has to sacrifice anything. 

On Business as an integrative unity: 

It seems to me that the first test of business administration, of industrial organ- 
ization, should be whether you have a business with all its parts so coordinated, 
so moving together in their closely knit and adjusted activities, so linking, inter- 
locking, interrelating, that they make a work unit — that is, not a congeries of 
separate pieces, but what I have called a functionwhole or integrativeunity. 

On the nature of Power: 

So far as my observation has gone, it seems to me that whereas power usually 
means power-over, the power of some person or group over some other person or 
group, it is possible to develop the conception of power-with, a jointly developed 
power, a co-active, not a coercive power. 

On the Psychology of consent and participation: 

Many people are now getting beyond the consent-of-the-governed stage in their 
thinking, yet there are political scientists who are still advocating it. And, indeed, 
it is much better to have the consent of the governed than not to have it . . . but 
we are also recognizing today that it is only a first step; that not consent but par- 
ticipation is the right basis for all social relations. 

The literature of management during the period between the two World 
Wars shows how completely Miss Follett's views gave expression to the 
framework which had become a fundamental part of the thinking of in- 

Although it would be impossible in this limited treatise to give even an 
indication of the wealth of writing done during this period, no paper on 
the history of management concepts would be possible without at least a 
partial mention of the many contributions made here and abroad. It is in- 
teresting to note the significant degree to which many of these fundamental 


books were the work of men whose professional careers had been directly 
concerned with business operations. Few of them were "writers," and it is 
almost by incidental and fortunate circumstances that their work is so 
readable, not discounting, of course, that clarity of conviction and of pur- 
pose are themselves no mean aids to such clarity of presentation. 

Dr. Harry Arthur Hopf, whose own work will be discussed at a later 
point, listed twelve indispensable books, chiefly of this general period, and 
his reviews on five are so indicative of the form which the evolving "science 
of managing" was assuming that they deserve to be quoted here in part: 13 

The Philosophy of Management, by Oliver Sheldon (of Great Britain), was 
"written from a broad perspective; it stresses the importance of scientific and ethi- 
cal principles, gives an excellent exposition of the social and industrial back- 
ground, and deals in an authoritative manner with fundamentals of management." 

Industrial and General Administration by Henri Fayol (a leading French man- 
ager of mining and industrial firms). "His masterly analysis of the essential func- 
tions of a business enterprise, his selection among them of administration for 
special treatment leading to a statement of five underlying principles, and his 
advocacy of the latter in the form of the Administrative Doctrine, combined to 
lay the foundation for a new school of thought known as 'Fayolism.' " 

Top-Management Organization and Control, by Holden, Fish, and Smith (with 
combined experience in educational and industrial circles in California), "deals 
with a field which has hitherto been little explored. . . . On the strength of their 
research study of the management policies and practices of thirty-one leading 
American industrial corporations, the authors have performed the signally valu- 
able service of bringing together, in admirably organized form, a great amount of 
factual and interpretive material bearing upon some of the most important and 
complex management problems with which large-scale industrial organization is 

The Principles of Organization by Mooney and Reilly (of the General Motors 
organization) is a scholarly work dominated to a large extent by the historians' 
approach. It covers the history of the management effort as it has applied to the 
organization of the state, the church, the army, and industry. "This is not a work 
which may be readily mastered. Its careful study will, however, supply the reader 
with a sound framework of principles which will serve excellently the purpose of 

Lectures on Organization by Russell Robb in a collection of the lectures de- 
livered in the course on industrial organization at Harvard University. "The au- 
thor, a distinguished engineer (connected with the Stone & Webster engineering, 
financing, and management organization) who died in 1927, brought admirably 
to expression in these lectures a varied experience distilled into a philosophy 
which, taken as a whole, constitutes perhaps the single most authoritative and 
appealing exposition stemming from an American to be found in the literature of 

Other indispensable books listed by Dr. Hopf were The Design of Manu- 
facturing Enterprises by Walter Rautenstrauch, Industrial Organization 
and Management by Ralph Davis, Industrial Management by Lansburgh 
and Spriegel, Budgetary Control by James McKinsey, Personnel Manage- 
rs Harry A. Hopf, Soundings in the Literature of Management, Hopf Inst, of Man- 
agement, Publication No. 6. 


ment by Scott, Clothier, Mathewson and Spriegel, Functions of the Execu- 
tive by Chester Barnard, and The Art of Leadership by Ordway Tead. 
The role of these authors is also interesting, showing how such universities 
as Columbia, Ohio State, and Northwestern, as well as industrial firms, 
were centers of thought of the steadily evolving "science of managing." 

In reading these books, the difference in emphasis in fundamental think- 
ing during the twenties and thirties compared to that of the first two dec- 
ades of the century is apparent. The essence of a deeper philosophy of 
Scientific Management was gradually being distilled and assembled out of 
the diverse objectives which had been the goals of early investigators. Over- 
all planning and measurement were replacing the patchwork approach, 
and though detailed studies of particular situations were necessarily con- 
tinued, they were increasingly referenced to the framework of the total 
social scene. 

The basic developments of the period were those of bringing into closer 
blend a proper mixture of the workers' and managers' individual emo- 
tional needs and the requirements of an industrial enterprise constituted 
for the rigors of competitive life in an increasingly complex technological 
environment. The Science of Managing thus began to appreciate and en- 
compass the techniques of multiplying human skills as well as mechanical 


When the final review of the history of management during this half- 
century is written, perhaps it may seek a representative of the movement 
who, in his work and in his writing, symbolizes the search for the basic and 
irrefutable principles of the science. They will need to look no further than 
Dr. Harry Arthur Hopf. Except by an extensive first-hand study of his writ- 
ings, which unfortunately consist of many separate talks and articles rather 
than bound volumes, it is impossible to gauge even closely the remarkable 
gifts he left as a legacy to the student and practitioner of today. 

Dr. Hopf, of English birth, came to America in 1898. His first job as a 
foreign language stenographer for an insurance company was an education 
in the unending frustration that was the normally accepted part of the non- 
management employee in business and industry of the time. He observed 
the disorganization of enterprises devoted solely to the demands of day-to- 
day problems, the dissatisfactions that came from indecisive or arbitrarily 
decisive management, the absence of rewards and compensation related 
even vaguely to effort and contribution at every level. 

Writing in Net Results, a regular publication of the Institute of Man- 
agement he later established, Dr. Hopf said: 

With courage (or was it foolhardiness?) and vigor I attacked several situations 
literally crying for improvement. It was then that I learned for the first time that 


the way of the reformer is hard, for it required years of the most arduous effort to 
win a sympathetic hearing for any suggestions. And with the advent of the new 
life insurance laws in New York State in 1907, my company, in common with other 
similar institutions, apparently surrendered itself to a case of paralysis of man- 
agement which was destined to persist for some years. . . . 

Arduous effort was the normal way of life for Dr. Hopf. His activity as 
an industrial and business advisor, his participation as founder and pilot of 
expanded management society activities, his work as a government con- 
sultant, during both major wars, his seemingly endless capacity to study, 
to understand, and to offer solutions for the basic problems of the manage- 
ment science paint a picture of nearly legendary proportions. 

Out of his many and varied contributions, two, perhaps more than any 
others, have earned him an enduring place in the annals of the manage- 
ment movement. Dr. Hopf, in his studies of the life insurance business was 
concerned, of course, with the problem of net efficiency. He noted that the 
criteria of success were universally related to size, and that these criteria 
were both wrong and potentially disastrous. Investigations into other in- 
dustries revealed that this universality was not confined to the insurance 
business, but that nearly everyone engaged in industry just assumed that 
the bigger they were, the better, the more efficient, and the more secure 
they were. 

At the Sixth International Congress for Scientific Management, held in 
London in 1935, he suggested that the time was ripe for the strengthening 
of the science of management and its transformation to the more inclusive 
one: optimology — the science of the optimum. In this talk Dr. Hopf said: 

Among the most profound problems with which society must concern itself 
under present day conditions is that relating to the determination, achievement, 
and maintenance of optimal conditions in all types of organized human enter- 
prise. The overwhelming economic disaster, from the effects of which the world 
is still suffering, halted with ruthless force an era of unparalleled expansion which, 
in the United States of America at least, assumed proportions indicative of a belief 
in the feasibility of unlimited growth and unchecked size. 

As we falteringly proceed upon the road to recovery, we are faced with new 
political, social aand economic trends and doctrines which are evidently destined 
to bring into being forms of organization and control without precedent in our 
experience, and to call for qualities of cooperation and joint action on the part 
of businessmen, engineers, social scientists, Government officials, Labour repre- 
sentatives, and others, far beyond any need of the past. Having then, narrowly 
escaped completed destruction upon the rock of Scylla, are we now being drawn 
with increasing force into the whirlpool of Charybdis? 

Dr. Hopf defined the optimum — for government, as well as business — as 
that state of development of an enterprise which, when reached and main- 
tained, tends to perpetuate an equilibrium among the factors of size, cost, 
and human capacity which would provide ideal realization of the organ- 
izational objectives, and he pointed out that the optimum size was at this 
state of equilibrium rather than connected, in any way, with bigness alone. 

Although Hopf placed no arbitrary limitations on size, he demonstrated 


that perpetuation of a growing enterprise depended upon the concomitant 
upward shifting of the equilibrium point. He emphasized that the natural 
economic barriers to growth are rarely reached, but that the limiting bar- 
riers were, most generally, organizational in nature. 

In concluding his paper, Dr. Hopf restated a conception of a method of 
formulating a technique to determine optimal size and relationships which 
he had originally presented at a meeting of the Taylor Society in 1930. 
They have become almost a working code of the mid-century science of 

1. Establish the objectives of the business in comprehensive terms; 

2. Define those general policies which should be followed regardless of oper- 
ating conditions or results; 

3. Define the task of management in human terms; 

4. Staff the executive group with members who are competent to perform suc- 
cessfully the tasks assigned to them; 

5. Furnish the executive group with standards of accomplishment by which 
performance can be accurately measured; 

6. Study operating results and establish trends of accomplishment; 

7. Adjust the rate of replacement of members of the executive group in line 
with requirements for maintaining the standards set; 

8. Consider particularly the factor of age in its relation to productive capacity 
of executives; 

9. Analyze all dynamic elements so as to discern the possible operation of the 
law of diminishing returns with respect to any element, substituting meas- 
urement for judgment, wherever possible; 

10. Establish the optimal size of organization at the level at which the most 
favorable operating results can be secured, within the limits of the prede- 
termined objectives and policies and without causing an executive overload 
at any point in the organization. 

Dr. Hopf argued vigorously throughout his life for new perspectives in 
management. He believed that managing, as such, had to become a special 
and professional activity. In speaking before the Society of Industrial Engi- 
neers in 1933, he quoted Dennison and Willitts 14 classic definition of a pro- 

1. A profession is an occupation which requires intellectual training as con- 
trasted with mechanical skill; 

2. A profession employs the fruits of science, uses the scientific method, and 
maintains an experimental attitude toward information; 

3. The professed knowledge is used by its applicant to the service of others, 
usually in a manner governed by a code of ethics; 

4. The amount of financial return is not the chief measure of success; 

5. The professions are given public and often legal recognition. 

Dr. Hopf examined the work of managing in the light of these criteria, 
seeking to establish a system of methods which would allow the professional 
manager to apply the first three as operational techniques. He suggested 

14 Henry S. Dennison, of the Dennison Manufacturing Company, and Joseph H. Wil- 
litts of the University of Pennsylvania. 


four basic divisions of the work as forming the dynamics of management: 
planning, organizing, coordinating, and controlling, a significant and pene- 
trating pioneer attempt to divide the over-all work of the professional man- 
ager into primary constituent elements. 

In describing the meaning of these four key words, Dr. Hopf continued: 

The first of these (planning) involves subdivision of activities to a point where 
they are within the compass of performance by persons of moderate ability. Failure 
to observe the requirement is bound to result in the creation of undue supervisory 
burdens and in obstructions to the smooth flow of operating routines. 

The second requirement (organizing) calls for proper relative evaluation of 
operating units and their grouping along related lines. When the maintenance of 
arbitrary lines of demarcation among departments, bureaus, divisions, sections, 
branches, units, etc., comes to be regarded as of greater importance than preserva- 
tion of the integrity of operating procedures, only disorganization and consequent 
lack of coordination ensues. . . . 

The third requirement (coordinating) is the establishment of clear lines of au- 
thority, responsibility, and reporting relationships. . . . Maintenance of clear lines 
of authority, responsibility, and reporting relationships under this type of control 
hinges to a large extent upon integration of the often divergent concepts held by 
the administrators of the manner in which their relationships to one another 
shall be composed and of the character of personal supervision over the organiza- 
tion which each shall exercise. 

The fourth requirement (controlling) goes right to the root of the problem of 
administrative coordination. It involves the separation of planning from per- 
formance, a sine qua non of effective organization. Progress in undertaking such 
separation is often attended by conflicts between the points of view of the staff, 
which is responsible for planning, and the line, which is charged with the accom- 
plishment of satisfactory operating results. Unless conflicts can be resolved in 
favor of cooperative action, sound conditions of administrative coordination are 

Like other great concepts in the philosophies, this one is deceptive in its 
simplicity. Its value as a working thesis, however is unquestioned for, with 
relatively evolutionary changes, it points yet to most of the basic keys to 
successful and professional managing. 

The range of Dr. Hopf s work encompassed practically all areas of busi- 
ness thinking in both its current and its historical and in both its national 
and its international aspects. He was at once the theoretician and the prac- 
tical man, the dreamer and the doer, the pragmatic statistician and the 
adventurous explorer. These words of Woodrow Wilson on the nature of 
leadership, written many years before Dr. Hopf's death, well describe this 
"first universal man of management": 15 

That the leader of men must have such sympathetic insight as shall enable him 
to know quite unerringly the motives which move other men in the mass is. of 

15 As he was called, in memoriam, in Net Results for October, 1949. Alvin E. Dodd, 
Executive Vice-Chairman, U.S. Council of the International Chamber of Commerce and 
President Emeritus, American Management Association, and many other business and 
industrial leaders paid a final tribute to Dr. Hopf through the medium of this little mag- 
azine which he and Mrs. Hopf had written for so many years. 


course self-evident but this insight which he must have is not the Shakespearean 
insight. It need not pierce the particular secrets of individual men: it need only 
know what it is that lies waiting to be stirred in the minds and purposes of groups 
and masses of men. 16 


The modern "Science of Managing" in its evolving full dimensions has 
come from this historical background, but it is none the less a true product 
of our own current day. 

It is the application of ethical principles by qualified professional man- 
agers to the problems of creating and maintaining a complex pattern of 
order which serves, in optimum fashion, the common interests of the peo- 
ple — that is, of the customers and the public as well as the owners, the 
executives, and the employees — and of the enterprise itself as a key and 
characteristic element of today's Industrial Society. 

Inherent in the acceptance of such a statement is the responsibility of 
determining the ethical principles which govern a situation, the qualifica- 
tions of a professional manager, the pattern of order, and the common 

The ethical principles can be briefed simply. To have meaning and to 
generate faith, a genuine "Science of Managing" can only exist in a climate 
of liberty, of reason, of morality, and of religion. Outside it — in an air of 
compulsion, force, materialism, and atheism — it is reduced to impotence 
and cannot exist any more than the civilization of which it is a part can 
continue under such circumstances. 

Deeply grounded in the understanding of our position is the acceptance 
of the natural rights of the individual as a natural person and that these, 
coming to him as a person in his own right, transcend in importance these 
other rights of society as an organized grouping of such individuals where 
functions come from them to be exercised for them. The individual creates 
his society not by self-abrogation of these rights, but by his voluntary modi- 
fication of his liberties derived from them. This is the common interest. 
This makes possible those kinds of common purpose which justify joint 
teamwork in organized activities. 

Dr. Einstein describes the temperament of the individual as an essen- 
tially independent being who willingly becomes a part of and accepts the 
obligations of a social environment: 

Man is, at one and the same time, a solitary being and a social being. As a 
solitary being, he attempts to protect his own existence and that of those who are 
closest to him, to satisfy his personal desires, and to develop his innate abilities. 
As a social being, he seeks to gain the recognition and affection of his fellow hu- 
man beings, to share in their pleasures, to comfort them in their sorrows, and 

16 Woodrow Wilson, Leaders of Men (Princeton, N.J.: Princeton University Press, 


to improve their conditions of life. . . . The abstract concept "society" means to 
the individual human being the sum total of his direct and indirect relations to 
his contemporaries and to all people of earlier generations. The individual is able 
to think, feel, strive, and work by himself; but he depends so much upon society — 
in his physical, intellectual, and emotional existence — that it is impossible to think 
of him, or to understand him, outside the framework of society. 17 

In order to join his personal aspirations understandingly and satisfyingly 
with those of the Society of which he is a part, it has become more and more 
necessary for man to seek for a rational pattern within which to guide and 
govern his actions. The patterns of order which constitute the goals of this 
elemental search of all people are achieved by the integration of the results 
of observation into generalized laws which can be applied with measurably 
successful results. 

Writing of Management and the American Future, 1 * Lawrence H. Ap- 
pley, now President of the American Management Association, character- 
ized the professional manager as ". . . an individual who, because of his 
training, experience, and competence, is employed to develop and expand 
the assets and realizations of owners." His horizons might well have been 
widened to include every conceivable area of human effort where Leader- 
ship is a necessity. 

The concept of professional managing as Leadership by persuasion 
rather than by command, and the codification of the Professional Man- 
ager's distinct and unique work into the four sub-functional elements of 
planning, organizing, integrating, and measuring, is another of the hard- 
won milestones in the development of a true Science of Managing. 19 

Speaking of the emphasis placed on developing professional managers 
by General Electric Company, President Ralph J. Cordiner has said: 

In such an approach is plainly found one deep source of our basic business 
climate which has made possible the productivity and the better living standards 
for more and more people which have literally thrust our country into its present 
position of world-wide leadership and responsibility. But this in turn brings new 
need to seek how to do a better and more professional job of management. 

17 Einstein, op. cit., p. 126. It is significant that in still later writings, Dr. Einstein — 
now clearly established as one of the foremost scientists of the ages — goes on to reject the 
concept of a purely random and patternless universe, in the striking phrase, "I cannot 
believe that God plays dice with the cosmos." 

18 Management at Mid-Century, General Management Series No. 169 (New York: 
American Management Association, 1954), p. 5. 

19 The modification of Dr. Hopf's earlier concept of "planning, organizing, coordinat- 
ing, and controlling," and the rejection of such incomplete classifications as "planning, 
organizing, and commanding," is apparent. Coordinating is the bringing together of 
actions; integrating implies unifying to form a complete whole. Control, Dr. Hopf's word, 
involves the exercise of guiding or restraining power, but such action inherently denies 
the substance of other sub-functions. Measuring is the process of reviewing performance 
against predetermined standards for the predicted results of planning, of making such 
measurements known, and thus of providing a corrective feed-back to the process, so that 
re-planning, re-organizing, and re-integrating may proceed; thus recognizing the need in 
organized efforts both for objectives, policies and clear structure on the one hand and for 
dynamic and vital progress on the other hand. 


J. Wilson Newman, President of Dun and Bradstreet, added further 
understanding of the significance of the Professional Manager concept 
when he said: 

Free enterprise brings up the subject of free will and decisions. In our country 
a man can risk his money, time, and skill in business without restraint. That is 
the way it should be, but as suppliers we are morally obligated to help him with 
all the friendly guidance we can offer. There is increasing evidence, too, that the 
new generation of entrepreneurs are better equipped in experience and under- 
standing than were their fathers or grandfathers, although the hazards they face 
today are certainly greater and more complex. . . . 

Yet the basic problem is human and emotional rather than statistical. All the 
fixed operating data can be offset by the intangibles of human nature. The im- 
pulse to business risk isn't generated in statistics. It finds life in the eye of the 
individual who sees an opportunity and measures the risk to achieve it. The 
quality of his judgment is tested by his ability to overcome obstacles. 20 


During the years of World War II, a new understanding of the problems 
born of organizations came into being. As in the time of the first World 
War, the demands of survival speeded the acceptance of the theories of the 
Science of Managing. Again, practice caught up with theory, but this time 
a new technology brought time for new horizons. 

Again, spurred by the fires of War, the managers of American business, 
together with the scientists as their partners, and with the spirit of both 
workers and soldiers to turn ideas and plans to reality, rose to new heights. 
Global logistics set the demands; the competitive enterprise system, modi- 
fied once more by governmental Production direction, met the challenge. 

But this time the scientific sweat of the ensuing decades provided a lubri- 
cant that allowed a multiplication of output almost fantastic in retrospect. 
The principles of managing enterprises of wide span and great diversity 
proved flexible enough to meet the test; and to allow the approach of 
Leadership by persuasion once again to vanquish the totalitarian, or com- 
mand, bid for supremacy. 

A most significant factor in this period was that the principle of "division 
of labor" was successfully applied to the work of Managing itself, to en- 
tirely new degrees. The whole philosophy of Decentralization developed to 
new dimensions, not merely decentralization to new geographic areas and 
to new plants, or even decentralization to separate "product businesses" 
within a common corporate framework, but actually as Mr. Cordiner said 
in a memorable address to the American Management Association in 
1945, "the decentralization of decision-making itself," so that the authority 
actually to decide was as close as possible to the work or action specifically 
calling for decisions. 

20 Management at Mid-Century, op. cit., p. 21 


Once more Dr. Hopf was chosen to summarize these trends. In an article 
called Evolution in Organization During the Past Decade, presented at 
the first post-war International Management Congress of CIOS at Stock- 
holm in 1947, he listed the following outstanding managerial trends and 
advances since the seventh CIOS Congress in Washington in 1939: 

1. Development of the personnel function; 

2. Decentralization of management and operation; 

3. Increased recognition and application of general principles of organization; 

4. Creation of new units of organization to meet increasing economic and social 

5. Improvement of techniques for policy formulation and execution. 

It is also important to note at this point that the United States Manage- 
ment Societies were active contributors to the war effort, satisfying the in- 
sistent pleas of industry for technical aid, and, at the same time, following 
a process of continual measuring, tempering, and re-application of organ- 
izational and operating principles. 

Such ability to handle problems — of overwhelming magnitude compared 
to those of the first war — and to simultaneously continue to advance the 
Science of Managing was due, in no small part, to the newly developing 
techniques of organizational communications. The engineer proved once 
again that the essential nature of managing was a derivative of the scientific 
method and that his place in guiding the affairs of men was essential to the 
vitality of the movement, not mere accident or prior right. 

Scientists and engineers who had worked to establish a factual basis on 
which communications systems could be predicated, came to realize the 
general resemblance of large social patterns to those of specific electrical or 
mechanical networks. Dr. Norbert Weiner, who is widely credited with 
leading the study and with coining the name "Cybernetics" from the Greek 
word meaning the art of the pilot or steerman, said: 

One of the most interesting aspects of the world is that it may be considered to 
be made up of patterns. A pattern is essentially an arrangement. It is characterized 
by the order of the elements of which it is made, rather than by the intrinsic 
nature of these elements. 21 

He went on further to point out that a pattern can be used to convey in- 
formation and will usually convey more information than the statement of 
isolated facts since it also conveys interrelations. 

Dr. Weiner made the penetrating observation that there is implied in 
the adoption of automation as an outgrowth of Cybernetics a transcending 
problem, for economic and for political and social statesmen alike, in 
"Handling the social-political responsibility to see that some way of han- 
dling their (the permanently displaced workers) leisure is provided, to 
make them fit into a society that is a going concern — since, in the face of 

21 Dr. Norbert Weiner, The Human Use of Human Beings (Boston: Houghton Mifflin 


radical changes, the statesmanship of management cannot stop at the edge 
of the individual firm. 22 

Dr. Claude Shannon of the Bell Telephone Laboratories and others car- 
ried Weiner's structual concept into fields which provided the management 
scientist with working theories which would allow him to apply and meas- 
ure the principles of professional management in rigorous fashion. 

In the first place, they established the importance of effective communi- 
cations as the key to proper operation of any system involving more than a 
single element. What was true of the electrical network was true in even 
larger measure of the corporate enterprise. 

Thus, Weiner, Shannon, and their associates and contemporaries be- 
lieved that "one of the lessons of Cybernetics is that any organism is held 
together by the possession of means for the acquisition, use, retention, and 
transmission of information" and that "communication of information is 
a problem in statistics . . . and that the theory, of course, does more than 
express a philosophy of communication, it provides universal measures." 23 

The ability to transmit directive information to implement change and 
the ability to feed back the results of the change was shown to be a func- 
tion of the use of optimum channels through the minimum number of 
transfer or recording points. In terms of the enterprise, as an organic whole, 
they showed that effective operation can be only achieved when directive 
information, the result of decision-making, is created and applied as close 
as possible to the point of action, and when the channels of information, 
transmission, and performance feedback are soundly conceived. Thus, they 
further affirmed the soundness of the wide-spread decentralization of man- 
agerial authority and responsibility, so characteristic of this period, which 
has to an astounding extent allowed customer and public benefits from 
the combined social acceptability of the relatively small decentralized busi- 
ness and the technological and other resources of the larger modern cor- 

In the second place, the Cyberneticists showed the possibilities of mathe- 
matical analysis in problems of business organization. Dr. Zay Jeffries, 
scientist and retired Vice-President of the General Electric Company, said 
in 1951: 

Our progress depends to a considerable extent on seeing to it that simplification 
processes move forward in approximate balance with the complicating processes. 
If this can be accomplished, then individuals with given ability can expect to go 
forward indefinitely without becoming casualties of their own complexity. 

The simplification processes for scientific management are many, but are 
greatly multiplied today by the rapid emergence of essentially statistical, 
mathematical, and logical method. These latter kinds of developments are 
divorced from traditional actuarial methods by the special attitudes of 

22 Meeting of New York Chapter of the Society for Advancement of Management, 1950. 

23 Francis Bello, "The Information Theory," Fortune, December, 1953. 


mind that bring them into play. Three essential steps form the basic tech- 
nique which distinguish the work: 

1. Thorough exploration and precise, understandable documentation 
of facts concerned in an operation will reveal broad principles and affective 
parameters, or governing factors and variables. 

2. The discovered principles and parameters may, in most instances, be 
defined quantitatively and manipulated with predictable results, so long as 
the system of which they are a part is essentially stable, as the fairly mature 
business characteristically tends to be. 

3. The disclosure of principles and the studied manipulation of affecting 
paraments will provide optimum procedures and processes, measurable 
work simplification, great precision of guidance, and better management. 

This is the technique of what is now coming to be called "Operations 
Research and Synthesis." Thus, the mathematician provided the profes- 
sional manager not only with applicable theories, but he has also provided 
him with an important working tool. 

The general use of computers in speeding the analysis and interpretation 
of the operations research process is growing rapidly and is facilitating the 
managerial approach based on "Thinking Through" to an ever more use- 
ful degree; which incidentally but re-affirms the perceptive foresight of 
Taylor in taking his steel plant data, and his speeds and feeds formulas, 
to the mathematicians for solution even before the turn of the twentieth 

Such use of today's modern electronics computers, moreover, progres- 
sively allows the pre-testing of an almost unlimited number of variables to 
determine their interrelation and their individual effect on alternative 
end objectives. Scientific management has thus, in effect, been handed the 
priceless technique of telescoping the time required in analyzing its course 
to an entirely new degree. 


This "history" of the evolution of the management movement in Amer- 
ica has, by definition, concerned itself only casually and but little with 
the great and important contributions of the many theorists and experi- 
menters in the field in Europe and other parts of the World. The develop- 
ment of basic principles has in no sense, of course, been a purely American 
effort, so, in fairness, it must be pointed out that the "history" written 
here is thus only one American expression of what has, in fact, been a 
world-wide search. 

CIOS, the International Committee for Scientific Management, has acted 
in behalf of some twenty or more member-organizations of the free world. 
Since its foundation in 1926, it has been a potent force in sustaining inter- 
national amity through trying economic and political times. The Gold 


Medal of CIOS is thus widely recognized as a symbol of the highest achieve- 
ment in the management field. 

Another omission, necessary since this paper has dealt with the concepts 
of the Science of Managing, has been the catalytic activities of our own gov- 
ernment, except when government direction has superseded normal eco- 
nomic interplay under the stress of global-scale War. However, the national 
government, representing the interests of all the people, has had the re- 
sponsibility of maintaining balance among all these interests and conse- 
quently has influenced sharply, by both positive and negative stimulation, 
the creation of a distinctly American form of capitalism which is now en- 
joined by its very nature from being monopolistic. 

The resultant competitive atmosphere, inherent in this philosophy of 
capitalism, has been one of the significant spurring forces which has helped 
to move Scientific Management out of the library or classroom and into 
the shop. 

Despite all the natural forces of both politics and bureaucracy, starting 
with the introduction of cost cards in the Frankford Arsenal in the 1880's 
by Henry Metcalf and continuing through to the present day, various de- 
partments of the government have made active use of the techniques of 
scientific management in their own operations. 

Particularly notable are, of course, the long and constructive contribu- 
tions of Mr. Herbert Hoover, who, as Secretary of Commerce in the mid- 
twenties, made significant steps in the elimination of waste in industry 
and in the standardization of products; and who, with the great first Presi- 
dent Masaryk of the then new republic of Czechoslovakia, was co-sponsor 
of the first International Management Congress at Prague in 1924. As 
President, Mr. Hoover later began a program for the improvement of gov- 
ernmental bureaus, and, as Chairman of the Committee on Organization 
of the Executive Branch of the Government, he continued this work years 
later during 1948 and 1949, and again in 1953 and 1954. 


What, then, is the present status of the Science of Managing? Is it, in 
the words of Mr. A. M. Lederer, the "Fifth Force," equal to and as neces- 
sary as the forces for labor, owners, government and consumers? 24 

It would seem, in practice today, impossible to deny the importance of 
management without denying simultaneously the factual nature and com- 
plexity of our current technological culture. In accepting the inevitable 
pattern which lies ahead, the place of such a Fifth Force is thus evident, 
and the character and quality of the Professional Manager who will both 
guide and discipline this "force" is of lasting moment. 

In a paper written in 1951, Notes on a Theory of Advice, Lyman Bryson 

24 Mr. Lederer, partner in the consulting firm of Morris and Van Wormer, is President 
of the Council for International Progress in Management (U.S.A.) and Deputy President 
of CIOS. 


of Columbia University emphasized the important obligation of the Pro- 
fessional Manager with respect to the integration of knowledge and au- 
thority which are essential counterparts of the managing function: 

The function of advice is one of the oldest in human affairs and certain abstract 
generalizations about it that could have been made in paleolithic times are still 

Most of these generalizations, however, have not been made and, as far, as can 
be discovered, no standard treatise in this field has ever been written. 

There are mountain piles of books on salesmanship, which is not disinterested 
advice, and a molehill of books on leadership, but nothing on the technique and 
difficulties of trying to put knowledge at the service of power. 

The right relation of knowledge and power is, however, one of the big problems 
of our age. 

We need to give the closest scrutiny to the processes whereby decisions are made, 
and the effect on those decisions of rational information, if we are to master the 
difficulties of freedom in a time when power is so developed and knowledge is so 

The function of advice is one of the crucial points in that relation and on that 
account may well be studied first. 

Peter Drucker, in the face of such conditions, well describes the threefold 
job of the Manager in connection with today's business enterprise. By sub- 
stituting country, institution, family, or any of the collective nouns which 
represent group entities for the word "company" and "enterprise," the 
universal nature of the "manager's" job, in this sense, is readily made ap- 
parent. As Mr. Drucker puts it: 

It is management's first responsibility to decide what economic factors and 
trends are likely to affect the company's future welfare. 

The second function of management is the organization and efficient utilization 
of the enterprise's human resources. In the industrial enterprise it is not individ- 
uals who produce but a human organization. 

The third major function of management is to provide a functioning manage- 
ment. This means that management has to provide for its own succession. ... It 
is tomorrow's management that will determine whether the enterprise will prosper 
ten years hence and indeed whether it will survive . . . today's management can 
at least make sure that there will be available to make tomorrow's decisions men 
who are fully qualified, fully trained, and fully tested in actual performance. 25 

Similar growing awareness of the necessity and almost universal applica- 
bility of the managerial functions in all areas of society has become truly 
international in scope. For instance, Mr. Lederer in mid-1953 described to 
members of the Council for International Progress in Management (U.S.A.) 
a renaissance of European industry which "finds its expression in a Euro- 
pean Management Movement eager to catch up with a comparable man- 
agement in the United States, which has its roots in the same philosophical 
belief and which has translated that belief into practical applications to 
an Industrial Society." 26 

25 Peter F. Drucker, The New Society (New York: Harper & Bros., 1949), p. 204. See 
also Drucker's earlier books on The End of Economic Man, The Future of Industrial 
man, Concept of the Corporation, and another forthcoming volume on The Practice of 
Management (New York: Harper & Bros., 1954). 

2 6 President's Report for First Six Months, CIPM, 1953. 


The enduring place of the Scientific Management Movement, therefore, 
seems assured. To those who have made a professional life of its study or 
practice, these further words of Lawrence Appley may serve as both en- 
couragement and credo: 

The future of America is dependent upon the caliber of management to be 
found in the ranks of business and industry. It is management that sets the pace 
and motivates labor to do its job. It is the combination of a courageous, competent 
management and a high-moraled, highly productive labor force that makes more 
things available for more people, and therefore, increases the standard of living. 

This management competency which is able to motivate labor to greater pro- 
ductivity requires sensitivity to certain moral obligations to the community. It 
must be understood by such management that our present form of society can be 
preserved only when those on the receiving end of leadership experience that for 
which democracy stands. If people are to know what a democracy really is, then 
they must enjoy its benefits in their work, as well as in their play. They must 
really feel and believe that their bosses are interested in them as individuals and 
in their development to the fullest potential of character, personality, and in- 
dividual productivity. 

The greatest doctors, teachers, lawyers, and engineers are those who have some 
sense of the human values involved in their work. So it is and will continue to be 
with managers. The price of leadership is criticism, but its more-than-compen- 
sating reward is sense of attainment. 27 

In a hundred and fifty years we have come from narrow and dimly per- 
ceived horizons into a world of limitless possibilities and new scientific, as 
well as human, frontiers. The Science of Managing is, like all true sciences, 
creating an expanding universe of concepts and principles. Because it has 
come to recognize its problems as a part of, and a party to, the nature of 
our culture, it will continue as an unabating challenge to thought and in- 
genuity so long as free men continue to join in common effort to achieve 
desired ends. 

27 Lawrence A. Appley, "Management and the American Future," Management at 
Mid-Century, op. cit., p. 13. 

The Concepts of Management 


The continued and continuing growth of the large corporation, the at- 
tendant changes in its internal structure and market relations, and the — in 

* Edward S. Mason, "The Apologetics of 'Managerialism,' " Journal of Business, Vol. 
XXXI, No. 1 (January, 1958), pp. 1-11. 


part — induced reactions to corporate size of other groups and of govern- 
ment are said to be creating a new type of capitalism in the United States 
markedly different from our own economy of fifty years ago and profoundly 
different from the capitalism of western Europe. Fortune magazine hails 
this change as the "permanent revolution." 1 Berle calls it the "twentieth 
century capitalist revolution." 2 Gardiner Means refers to "collective capi- 
talism" as distinguished from the classical variety. 3 Soberer, though less 
articulate, businessmen and business groups agree that the American "en- 
terprise system," as some like to call it, is something new and different, and 
European observers who share this view are not lacking. 

Although the elements responsible for this transformation are numerous 
and complex, there seems to be general agreement that the primary factor 
is the change in the size and structure of the business corporation and the 
training and motivations of those in control of its operations. Control has 
passed from ownership hands into the hands of management; management 
personnel is more highly specialized and selected for professional compe- 
tence; its motivations are substantially different from those of the owner- 
capitalist; and its area of discretionary action and the character of the 
limitations that bound their area differ markedly from those relevant to 
the enterprises of an earlier capitalism. There is some reason, therefore, 
to characterize this supposed transformation of American capitalism by the 
term "managerial." 4 Current expositions of the merits of the American as 
against other brands of capitalism emphasize heavily the role of profes- 
sional managers in the large business firm. And a recent study of American 
business ideology distinguishes the older "classical" from the more modern 
"managerial" versions of the creed. 5 

It is not that the large firm is relatively more important in the American 
economy, in any substantial sense, than it was fifty years ago. Firms have, 
of course, increased tremendously in size, but so has the economy. Careful 
studies of what is called "economic concentration" have not been able to 
detect any markedly increased share of the one hundred or two hundred 

1 Editors of Fortune, with the collaboration of Russell W. Davenport, U.S.A.: The 
Permanent Revolution (New York: 1951). 

2 A. A. Berle, The Twentieth Century Capitalist Revolution (New York: 1954). 

3 Gardiner C. Means, "Collective Capitalism and Economic Theory" (lecture at Mar- 
shall Wythe Symposium, Williamsburg, Va., 1957). 

4 In his The Managerial Revolution (New York: 1941), James Burnham sees the mana- 
gerial group in quite a different light than the writers cited here. He develops an essen- 
tially technocratic theory set in a class struggle context. His managers are those in charge 
of the "actual technical process of producing" (p. 82), and they have a clear conflict of 
interest with those who "have the functions of guiding the company toward a profit" (p. 
83), with the bankers and financiers, and with the stockholders. Furthermore, "it is a his- 
torical law, with no apparent exceptions so far known, that all social or economic groups 
of any size strive to improve their relative position with respect to power and privilege in 
society" (p. 89). And the technical managers, in Burnham's opinion, are so placed as to 
assure victory in this struggle of interests and classes. 

5 Francis X. Sutton, Seymour Harris, Carl Kaysen, and James Tobin, The American 
Business Creed (New York: 1956). 


largest industrial firms in total industrial output, employment, or assets or 
any marked increase in the share of manufacturing output produced in 
industries "dominated" by large firms. 6 Furthermore, the American econ- 
omy is not particularly highly concentrated as compared to other indus- 
trialized economies. Nevertheless, it is pointed out that, whether or not 
concentration is increasing, large firms account for a high percentage of 
manufacturing and industrial output. It is said, and with some reason, 
that the large corporations are the most dynamic units in the most dynamic 
sector of the economy and not only are responsible for a major part of the 
improvement in methods of production, which then become available to 
other producers, but actively shape consumption patterns through the con- 
tinual injection of new products. Furthermore, it is maintained that the 
methods and attitudes of corporate managements have an influence ex- 
tending far beyond the spheres of operations of the large firm. Finally, and 
with the assistance of the golden kazoos of Madison Avenue, it is asserted 
that the philosophy of corporate management penetrates into all the in- 
terstices of American life. Thus our economy is substantially more "man- 
agerial" than any data on concentration would suggest. 

How far corporate managements are circumscribed in their actions by 
the surrounding social environment is a question on which the experts 
differ. Some emphasize the continued importance of market competition, 
even though competition among a few is a vastly different thing from the 
"atomistic" competition of classical economic theory. This is the real rea- 
son, says Berle, "Why oligopoly, however imperfect, is always preferable 
to monopoly." 7 He substantially weakens his argument, however, by assert- 
ing that "in a system of corporate concentration the result of competition 
is some sort of planning; and planning does not reduce power but increases 
it." 8 Essentially, as Berle sees it, the important limitation to antisocial be- 
havior on the part of corporate management is "the force of public opinion, 
which may translate itself into political action in a great variety of ways — 
and which therefore is heeded before it has so translated itself." 9 

Others stress the limitations imposed by organizations on the opposite 
side of the market. Big sellers deal with big buyers. Large corporate em- 
ployers are confronted by organized labor. The producers of citrus fruits 
and other farm products form state-protected marketing associations to 
bargain with large-scale food processors. Galbraith has popularized the 
phrase "countervailing power" to describe this phenomenon. 10 

6 Cf., in particular, Morris Adelman, "The Measurement of Industrial Concentration," 
Review of Economics and Statistics, Vol. XXXIII (November, 1951), 269-96; and G. War- 
ren Nutter, The Extent of Enterprise Monopoly in the United States, 1899-1939 (Chicago: 

7 Op. cit., p. 58. 

8 Ibid., p. 52. 

9 Ibid., p. 54. 

10 J. K. Galbraith, American Capitalism: The Concept of Countervailing Power (Bos- 
ton: Houghton Mifflin Co., 1952). 


While attributing importance both to increased governmental supervi- 
sion and to the growth of other centers of power, the Editors of Fortune 
find that the reasons for the change in corporate behavior "at the bottom 
... is simple morality. . . . The manager is becoming a professional in the 
sense that like all professional men he has a responsibility to society as a 
whole." 11 

This does not mean that corporate management eschews the search for 
profits. "But the great happy paradox of the profit motive in the American 
system is that management, precisely because it is in business to make 
money years on end, cannot concentrate exclusively on making money here 
and now." To keep on making money years on end, it must, in the words 
of Frank Abrams, chairman of the Standard Oil Company of New Jersey, 
"conduct the affairs of the enterprise in such a way as to maintain an 
equitable and working balance among the claims of the various directly 
interested groups — stockholders, employees, customers, and the public at 
large." 12 

This statement of the groups to whom corporate management recognizes 
a responsibility — sometimes corporate suppliers are added — has become 
standard in the literature on management. Implicit in this analysis is the 
notion that, if corporate management intelligently pursues long-term profit 
maximization, its stockholders, employees, and others will receive returns 
that are recognized to be fair and equitable not only by the parties at issue 
but also by the general public. Other writers in the "managerial" group 
would question the importance of profit maximization, but they are in 
general agreement on the beneficent result. 

The identity of private and public interest traced out by Adam Smith's 
invisible hand was achieved in an assumed atomistic economy in which 
the power of each unit was severely limited by the action of its myriad of 
rivals. It is a little more difficult to understand the working of the dis- 
tinctly visible hand in a managerial economy, particularly if we accept 
Berle's description of the power of corporate managements: 

In practice, institutional corporations are guided by tiny, self-perpetuating oli- 
garchies. These in turn are drawn from and judged by the group opinion of a small 
fragment of America — its business and financial community. Change of manage- 
ment by contesting for stockholders' votes is extremely rare, and increasingly dif- 
ficult and expensive to the point of impossibility. The legal presumption in favor 
of management, and the natural unwillingness of courts to control or reverse 
management action save in cases of the more elementary types of dishonesty and 
fraud, leaves management with substantially absolute power. Thus the only real 
control which guides or limits their economic and social action is the real, though 
undefined and tacit, philosophy of the men who compose them. 13 

Nevertheless, this picture of the socially desirable behavior of large cor- 
porate managements is widely accepted both at home and abroad. And in 

11 Op. cit., pp. 68 and 79. 

12 ibid., pp. 79-80. 

13 Op. cit., p. 180. 


Britain it is becoming, apparently, a leading argument against further 
nationalization. Keynes commented on the phenomenon in the middle of 
the 1920's: 

One of the most interesting and unnoticed developments of recent decades has 
been the tendency of big enterprise to socialize itself. A point arrives in the growth 
of a big institution — particularly a big railway or public utility enterprise, but 
also a big bank or big insurance company — at which the owners of the capital, 
i.e. the stockholders, are almost entirely dissociated from the management, with 
the result that the direct personal interest of the latter in the making of great 
profit becomes quite secondary. When this stage is reached, the general stability 
and reputation of the institution are more considered by the management than 
the maximum profit for the stockholders. 14 

Keynes drew from this observation the same conclusion that a strong 
element in the British Labour party now seems to be drawing, that is, if 
big enterprises tend to "socialize" themeslves, why should the government 
bother to nationalize them? 

A recent policy statement of the National Executive Committee of the 
British Labour party attempts a reassessment of the problem of national- 
ization. 15 It firmly repudiates the doctrinaire socialist case for nationaliza- 
tion; expresses the belief that managements of large corporations, in gen- 
eral, not only run their enterprises efficiently but recognize a responsibility 
to the general public and to labor and other interests associated with the 
production process; and chooses as its chief target the size of the dividend 
accruing to "functionless" owners (i.e., stockholders). The report quotes 
approvingly from Berle. "The capital is there, and so is capitalism. The 
waning factor is the capitalist." 

If the only thing wrong with managerial capitalism is the size of the 
return to functionless owners, the remedy is not nationalization but, pri- 
marily, changes in the tax system. As a prominent Labour member of 
Parliament puts it, "Industrial power in every large developed economy 
now rests with a managerial class which is responsible to no one. The form 
of ownership is irrelevant." 16 Or, as expressed by another influential La- 
bour spokesman: "Efficiency has little to do with ownership because in 
the modern corporation ownership has little to do with control. . . . The 
basic fact is the large corporation, facing fundamentally similar prob- 
lems, acts in fundamentally the same way whether publicly or privately 
owned." 17 

Needless to say, the American exponents of managerial capitalism would 
not draw the same conclusions with respect either to the relative efficiency 
of public and private operations or to the proper treatment of dividends. 
But if it is true that the large corporation sets a control problem to which 

14 J. M. Keyes, "The End of Laissez-Faire" (1926), republished in Essays in Persuasion 
(London: 1931), pp. 314-15. 

15 Industry and the Nation (London: 1957). 

16 Denis Healey, "British Labor's New Look at Industry," New Leader, August 19, 1957. 

17 C. A. R. Crosland, The Future of Socialism (London: 1957), pp. 479-80. 


a managerial bureaucracy little influenced by consideration of ownership 
interest is the only answer, it is somewhat difficult to see why such man- 
agerial control could not be as effectively exercised within the framework 
of properly devised public bodies. // ownership is completely divorced 
from control, it becomes hard to see why stockholders are entitled to more 
than an interest payment plus a premium for risks that are substantially 
smaller for large than for small firms. If there are no legally enforceable 
responsibilities of management either to owners or to other groups, it 
becomes doubtful whether, over time, these responsibilities will be recog- 
nized. // it is true that corporate managements are "tiny, self-perpetuating 
oligarchies," is this a system of selection that, in the long run, can be ex- 
pected to provide our managerial system with effective managerial talent? 
Finally, if the competitive limitations to corporate action are notably weak, 
what is to prevent monopoly profits from accruing either to managements 
or to the special groups to whom managements recognize some loose but 
not legally enforceable responsibility? 


The managerial literature provides tentative answers to some of these 
questions, but they tend to be conflicting and notably unpersuasive. This 
is unfortunate, since it seems to be a fact that the institutional stability 
and opportunity for growth of an economic system are heavily dependent 
on the existence of a philosophy or ideology justifying the system in a 
manner generally acceptable to the leaders of thought in the community. 
Classical economics in the form of a "philosophy of natural liberty" per- 
formed that function admirably for nineteenth-century capitalism. As 
everyone now recognizes, classical economics provided not only a system 
of analysis, or analytical "model," intended to be useful to the explanation 
of economic behaviour but also a defense — and a carefully reasoned de- 
fense — of the proposition that the economic behavior promoted and con- 
strained by the institutions of a free-enterprise system is, in the main, in 
the public interest. Adam Smith's Enquiry into the Nature and Causes of 
the Wealth of Nations was precisely what the title indicated — an exami- 
nation into the institutional structure best suited to promote the growth 
of the nation's income and wealth. Until the end of the nineteenth cen- 
tury, moreover, this element of justification continued to play an important 
role in the literature of political economy. 

So cogent was this defense of economic liberty that not only the leaders 
of business but moral philosophers and practically all informed shapers of 
public opinion accepted its postulates. The philosophy demonstrated that 
a free-enterprise, competitive economy encouraged the most efficient use of 
resources and thus maximized the national income it was possible to attain 
with these resources. Such an economy assured maximum opportunity for 
the upward mobility of talent both through the selection by self-interested 


owner-controllers within the firm and through the unconstrained and rela- 
tively simple formation of new firms. It guaranteed justice in the distribu- 
tion of income by assuring payment to the factors of production of the 
value of their marginal products, that is, by rewarding them in proportion 
to their contribution to the national income. Finally, this system of thought 
drew a clear and reasoned line between the proper role of government and 
the proper role of private enterprise. If, for technological or other reasons, 
the optimum size of the firm in a certain area of economic activity was 
incompatible with the maintenance of competition, the case was made for 
public ownership or regulation. Elsewhere, and pertaining to the vast mass 
of economic activity, private initiative within competitive restraints could 
be expected to promote the public interest, provided the government held 
the ring and established the rules. 

Toward the end of the century, it is true, the growth of large firms and 
other institutional changes began to call into question the assumptions 
on which the system was built. And the economics profession, which had 
been primarily responsible for the structure, began to gnaw at the founda- 
tions. In the light of these changes and their critique, the attempted re- 
suscitation by the National Association of Manufacturers, in 1946, of the 
"philosophy of natural liberty" is inevitably a somewhat motheaten patch- 
work. 18 But, for over a century, the philosophy was accepted by political, 
business, and moral leaders as gospel and effectively justified the ways of 
man to God. It cannot be too strongly emphasized that the growth of nine- 
teenth-century capitalism depended largely on the general acceptance of a 
reasoned justification of the system on moral as well as on political and 
economic grounds. 

The managerial literature appears devastatingly to undermine the intel- 
lectual presuppositions of this system. And what does it offer in its place? 

The beneficent working of the free-enterprise system assumed a continu- 
ous striving for maximum profits on the part of the owner-controllers of 
individual firms, a structure of markets sufficiently competitive to constrain 
the power of a single firm to influence wages and profits within narrow 
limits, and the capacity of consumers to maximize their satisfactions from 
the expenditure of their income through the exercise of consumer's choice 
(consumer's sovereignty). The managerial philosophy puts in doubt all 
three of these critical assumptions. 

The striving for maximum profit in a free-enterprise system is not a mere 
exhibition of senseless avarice but an essential cog in the mechanism that 
determines both efficient resource use and the payment of factors in pro- 
portion to their productivity. Under the urge toward maximum profits 
prices are raised under conditions of short supply, assuring the distribution 
of the available goods only to those who are willing to pay and, on the 

18 National Association of Manufacturers, Economic Principles Commission, The 
American Individual Enterprise System, Its Nature and Future (2 vols.; New York: 1946). 


supply side, creating inducements to increased output that will have the 
effect of eliminating the shortage. Labor and capital move to industries 
and areas of maximum productivity and gain, and, in the process, wages 
and other factor payments are adjusted in accordance with changes in the 
magnitude of factor contributions. 

The managerial philosophy not only calls into question the assumption 
of profit maximization as a workable description of entrepreneurial be- 
havior but denies the institutional basis of the classical profit motivation. 
According to Keynes, the "general stability and reputation of the institu- 
tion" rank above profit maximization in the objectives of management. 
Crosland finds that business leaders can acquire prestige "by gaining a 
reputation as a progressive employer ... or by being known to possess high 
standing in Whitehall, and to have the ear of Ministers, an obvious candi- 
date, perhaps for Royal Commissions and National Advisory Councils." 
This road to prestige, as he admits, may well be at the expense of profits. 
The managerial literature repeatedly emphasizes the weakening of respon- 
sibility of management to owners — who are, after all, only receivers of 
profit — in favor of a diffuse and undefined responsibility to workers, sup- 
pliers, customers, and the general public. In the exercise of this responsi- 
bility, says Berle, the corporation exhibits its "conscience." 

But, if profit maximization is not the directing agent, how are resources 
allocated to their most productive uses, what relation have prices to relative 
scarcities, and how do factors get remunerated in accordance with their 
contribution to output? Assume an economy composed of a few hundred 
large corporations, each enjoying substantial market power and all di- 
rected by managements with a "conscience." Each management wants to 
do the best it can for society consistent, of course, with doing the best it 
can for labor, customers, suppliers, and owners. How do prices get deter- 
mined in such an economy? How are factors remunerated, and what rela- 
tion is there between remuneration and performance? What is the mecha- 
nism, if any, that assures effective resource use, and how can corporate 
management "do right by" labor, suppliers, customers, and owners while 
simultaneously serving the public interests? The "philosophy of natural 
liberty" had a reasoned answer to these questions, but I can find no rea- 
soned answer in the managerial literature. 

Some of the managerial writers do not, it is true, abandon the notion of 
profit maximization. Managements continue to strive for maximum profits 
in some long-run sense. But their motivation is very different from that of 
the classical owner-entrepreneur whose profit was his livelihood. Business 
is viewed as a kind of game in which profit has approximately the same 
significance as one's golf score. According to Ruml: 

Profit becomes numbers on a score board, the pay-off entry in a competitive 
game. The incentive to management is not the profit as profit, but the prestige 
that attaches to having made a good record, to being recognized as being more 
successful than the management of competing firm in the same industry, or to 


having earned more than last year or more than a previous management was able 
to earn. 19 

If this is indeed the profit motivation of corporate managements, the 
pertinent question would appear to be how stable and persistent this moti- 
vation is when managers have open to them many other roads to approba- 
tion and prestige that can be chosen without seriously endangering either 
the continued existence of the corporation or the size of their own re- 
muneration. Does profit maximization represent merely a social lag, a 
vestigial remnant from an earlier full-blooded capitalism, or has it been 
firmly ensconced by the rules of the managerial game in a position from 
which it will not easily be dislodged? The managerial literature is not very 
illuminating on this point. 

The second critical postulate of the classical school was the existence of 
competition in the form of a sufficiently large number of buyers and sellers 
in every important market seriously to limit the influence on prices on any 
single buyer or seller. The contribution of competition, so denned, to the 
good society was twofold. It assured a limitation of private power, and it 
was an essential part of the mechanism that brought about effective use 
of resources and remuneration consistent with performance. 

The managerial philosophy, while emphasizing the difference and the 
superiority of the new-style, large-enterprise corporate capitalism from and 
to the nineteenth-century "atomistic" brand, is ambivalent concerning the 
effects of corporate size on competition. According to one current of man- 
agerial thought, the large firm, far from stifling competition, has released 
its potential effectiveness. Another school, however, admitting that con- 
centration and oligopoly have seriously weakened competitive restraints, 
finds adequate checks to abuse of power in the "countervailing" power of 
suppliers and customers, in the fear of government action, in public opin- 
ion, or in the conscience of corporate managements. 

The first group extolls the merits of the "new competition" of big busi- 
ness. 20 While price competition may be less active, the dynamic competi- 
tion of new products and new processes to which the large firm is the prin- 
cipal contributor gives the consumer all its advantages and more. This 
approach owes much to Schumpeter's attack on the welfare conclusions of 
static equilibrium analysis. 21 The "competition that counts," he avers, lies 
in the process of "creative destruction" involved in the introduction of 
new products and new processes. This is what the static analysis leaves out. 
There is, certainly, much to be said for this view. It is, however, essentially 
an attack on received doctrine concerning a particular kind of competition 
rather than a reasoned defense of a different form. The exponents of the 

19 Beardsley Ruml, Tomorrow's Business (New York: 1945), p. 106. 

20 Cf. David E. Lilienthal, Big Business: A New Era (New York: 1952). 

21 J. A. Schumpeter, Capitalism, Socialism, and Democracy (New York: 1952), especially 
chaps, vii and viii. 


new competition have hardly begun to grapple with the real problems 
implicit in their view of the structure and functioning of industrial mar- 
kets. What size of firm is needed for effective innovation in various seg- 
ments of the economy, and what relation does this size bear to the sizes 
of existing firms? If the "optimum" size of firm is such as to produce a 
higher degree of concentration in important markets, what assurance is 
there that these "oligopolists" will not, in the course of time, act like 
monopolists? Granted that successful innovation requires a substantial de- 
gree of market power, are there not social disadvantages in the uncon- 
trolled exercise of private power that may justify public action even at the 
expense of some sacrifice of business efficiency? 

Although these questions are not effectively answered in the managerial 
literature, the position of those who maintain that big-business competi- 
tion can and should be kept "workably" competitive in the public interest 
is more persuasive than the views of those who, like Berle, rejoice in the 
disappearance of competition in favor of industry planning. If market con- 
centration does, in fact, mean joint action on the part of oligopolists, what 
effective limitation to private power remains in the economy? The "Coun- 
tervailers" have never been able to explain why countervailance does not 
lead merely to a sharing of monopoly profits at the expense of the rest of 
the economy. If fear of adverse government action is the limitation, what 
government action is feared, and what evidence is there that it can and 
will be taken? Nor does the conscience of corporate management, duly 
instructed by public opinion, appear to be a particularly reliable reed. 

The classical defense of competition may have been full of holes, but it 
managed to convince nineteenth-century opinion that an economy so 
guided satisfied reasonably well the tests of efficiency and equity. It seems 
doubtful whether, to date, the managerial literature has provided an 
equally satisfying apologetic for big business. 

Finally, the welfare conclusions of the classical defense of capitalism 
depended on the assumption that the primary purpose of economic activity 
was to satisfy human wants. The final consumer was the ultimate authority; 
his desires, backed by adequate purchasing power, and expressed in the 
free market, gave the necessary direction to business enterprise; and, as 
the doctrine of "consumer sovereignty" implied, the customer was always 
right. In the classical system "tastes" or "wants" on the demand side and, 
on the supply side, technological and resource limitations to production 
were "given data." The test of an economic system lay in the efficiency with 
which it accomplished, within these limitations, the satisfaction of human 

This doctrine of consumer sovereignty, with its insistence on a quasi- 
biological, quasi-cultural, but fundamentally persistent character of hu- 
man wants, was already under severe attack from the psychologists and 
sociologists before the managerial philosophy appeared on the scene to 
give the coup de grace. In an economy whose supreme talent is devoted 


not only to the creation of the new product but to making the customer 
like it, this sovereignty turns out to be limited indeed. The consumer may 
have a biological need for food but not necessarily in cellophane wrapping; 
he may have a culturally determined desire for transportation, but he can 
presumably get there without fins on his car. The managerial system stands 
ready not only to supply goods and services and to create the want for them 
but also, by manipulating the socially acceptable rate of obsolescence, to 
shorten or prolong the period during which these goods and services may 
be expected to provide satisfaction. 

If this is so, what happens to the doctrine of consumer sovereignty and 
the tests of the efficiency of an economic system that are cast in terms of its 
capacity to satisfy human wants? The measuring rod turns out to be highly 
elastic — to be extended or shrunk at the whim of those who manage the 
system. Classical economics was fairly successful in persuading nineteenth- 
century opinion that fifty million customers cannot be wrong. Will man- 
agerial economies be as successful in persuading twentieth-century opinion 
that Madison Avenue is always right? 


It has been the contention of the previous discussion (a) that the insti- 
tutional stability and opportunities for growth of an economic system 
depend heavily on the availability of an ideology justifying the system in 
a manner generally acceptable to the leaders of thought in the community; 
(b) that, in the main, classical economics performed this task admirably for 
nineteenth-century opinion; and (c) that, to date, the managerial literature 
has not produced an equally satisfying ideology for twentieth-century 

The relative failure of managerial economics adequately to perform 
this task may be susceptible to rather different explanations. It is possible 
that the economy is not so managerial as the literature supposes. Or the 
description may be correct, but the managerial economists have not as yet 
penetrated deeply enough into the system to be able to understand and 
explain why managements apparently responsible to no one and enjoying 
substantial freedom of action always, or generally, act in the public in- 
terest. Or, finally, it may be that corporate managements do not always 
or generally behave in this manner and that consequently the system is 
not so beneficent as the managerialists believe. I might venture the opin- 
ion that there is some truth in all these explanations. 

Despite such phrases as the "permanent revolution," the "managerial 
revolution," the "capitalist revolution," and the "new era," some doubt 
persists that the contemporary economy is as different as all that from the 
American economy of 1900. It has been pointed out that the share of indus- 
trial assets, employment, and value added accounted for by the largest 
firms today is about the same as their share fifty years ago. Furthermore, 


these large firms, though indubitably important, represent a fraction of 
total economic activity. (The two hundred largest private employers of 
labor employ roughly 10 per cent of the gainfully employed). By no means 
all the manufacturing firms are in oligopolistic or concentrated markets, 
and consequently their managements are substantially constrained by com- 
petitive forces. Outside the field of manufacturing most of the large firms, 
as well as many small firms, are subject to government regulation. 

Moreover, a look at certain broad indexes of economic behavior does 
not reveal any startling or revolutionary break in long-run trends. Despite 
the "dynamism" of the new competition, the rate of growth of national 
income is not very different from what it was before 1900. The relation 
of labor to non-labor incomes before taxes is about what it was before 
World War I. Significant changes in the distribution of personal disposable 
income are primarily the result of tax changes that are hardly attributable 
to managerialism. The broad look reveals very substantial elements of 
stability in the system. 

Nevertheless, enough has changed both in the system and in techniques 
of thinking about the system to make the classical apologetic quite un- 
acceptable to twentieth-century opinion, and the managerialists are quite 
right in sensing that a new, or at least a refurbished, ideology is called for. 
Regardless of whether the share in total industrial activity of the largest 
firms has increased or diminished, in numbers of employees, assets, and 
value added accounted for by the big contemporary enterprises, they are 
many times larger than was true of the largest firms of the turn of the 
century. This increase in absolute size inevitably brings with it changes in 
managerial organization and techniques best described, perhaps, by the 
single word "bureaucracy." The hierarchical structure, the professional 
training and attitudes of top personnel, group decision-making, and pro- 
liferation of administrative rules that characterize any large-scale organ- 
ization are common to big-business corporations. In the words of John R. 
Commons, administrative relationships between superiors and inferiors 
rather than market relationships between legal equals dominate the cor- 
porate sector of the economy. The entrepreneur of classical economics has 
given way to something quite different, and along with him disappears a 
substantial element in the traditional capitalist apologetic. 

The attenuation of ownership and the expansion of the area of man- 
agerial control in large corporations are other significant developments 
rightly emphasized in the managerial literature. Just how much difference 
this shift in the locus of control makes to the functioning of the economy 
depends largely on the competitive position of big firms in the markets 
in which they operate. On this point, as we have seen, the managerial 
literature is conflicting. The entrepreneur of classical theory, hemmed in 
by market limitations, had very little room for maneuver. If large firms 
operate in "workably competitive" markets, the behavior of management- 
controlled firms may be constrained into channels not very different from 


those followed by owner-controlled enterprises. If, on the other hand, con- 
trol is divorced not only from ownership but from effective competitive 
limitations, the opportunities both for "soulless" and for "soulful" be- 
havior are substantial. 

Finally, with the growing importance of product variation and selling 
efforts and with the development of increasingly close relations between 
the large corporation and the instrumentalities of mass communication, it 
becomes more and more difficult to prop up the wasting concept of con- 
sumer sovereignty. But, though this monarch is obviously on the way out, 
his successor is still to be found. The attack on the capitalist apologetic of 
the nineteenth century has been successful, but a satisfactory contemporary 
apologetic is still to be created. I suspect that, when and if an effective new 
ideology is devised, economics will be found to have little to contribute. 
Economists are still so mesmerized with the fact of choice and so little con- 
cerned with its explanation, and the concept of the market is still so central 
to their thought, that they would appear to be professionally debarred from 
their important task. I suspect that to the formulation of an up-to-date 
twentieth-century apologetic the psychologists, the sociologists, and, pos- 
sibly, the political scientists will be the main contributors. It is high time 
they were called to their job. 

22 The phrases are Carl Kaysen's. Cf. "The Social Significance of the Modern Corpora- 
tion," in American Economic Association, Papers and Proceedings, 1956, May, 1957. 

Social Responsibilities of Management 

All of us know that we have developed a very complex and intricate kind 
of administrative machinery for institutional and governmental opera- 
tions. Of course, most of you here, I know, are interested in the govern- 
mental phase of administrative ethics. The complexity and interdepend- 
ence of our society have forced our attention to ethics in administration 
to a greater degree than ever before. 

There are some things we know, of course. We know that specialization 
is increasing, and we realize that we therefore must give increasingly care- 
ful attention to coordination in view of this fact of contemporary life. We 
know that the size of our operations is increasing and that, therefore, dele- 
gation of responsibility and coordination of that responsibility is increas- 

* Hurst R. Anderson, "Ethical Values in Administration," Personnel Administration, 
Vol. XVII, No. 1, pp. 2-8. 


ingly important. We also know, I assume, that this requires a philosophy 
of administration as well as a technique of administration. 

I don't see how it is possible for the individual who is an administrator 
in this period to divorce the technique of administration from a funda- 
mental philosophy of personal and social life. You can do it in a superficial 
sense, but every time you make a decision about an administrative prob- 
lem, or any time you seek to resolve an administrative tension, you have 
to resolve it in terms of some assumptions that lie at the heart of what we 
may call a philosophy of personal and social living. 

All over the country, we have seen a rising wave of vitriolic criticism of 
public education in American. What is the trouble? Well, it results largely 
from the fact that we have never developed the kind of coherent philosophy 
at the core of American public education that will hold this institution 
together and hold the people behind it. 

The same is true of economic and political institutions, we all know. 
The point is a very simple one, that in order to construct intelligently a 
program of administration for political institutions, for educational insti- 
tutions, for industrial institutions, we must have at the heart of the enter- 
prise, whatever it may be, a philosophy of personal and social life. We have 
to have a pattern of values. We must have a fundamental set of beliefs or 
assumptions upon which we can operate intelligently. 

A Code of Personal and Social Living 

Now, my question is this: is it possible in America, in this mid-century 
period, to dig out of the heritage which is ours and the practices which 
are ours, some principles upon which we can agree? We have prided our- 
selves on permitting every brand of philosophy and religion to grow and 
develop, and we are proud of it, and rightly proud of it. Is it possible, with 
that kind of background, in a free society, to find a pattern of values which 
we can agree upon as the foundation upon which to construct a philosophy 
and technique of administration? 

That is a tough order. I am not going to try to present a personal solu- 
tion of the problem; instead, I am going to refer to a study that was made 
some three years ago, in the field in which I work, in the field of education. 
This study was made by the National Education Association, and it was 
the first time in the history of public education in America that this prob- 
lem has been faced systematically. Is it possible to find at the core of 
American life those spiritual and moral values upon which we can agree — 
atheists and Christians, if you will, Catholics and Protestants and Jews? 

The NEA commission worked for quite a while and finally published 
a volume which has been rather widely distributed in educational circles. 
I believe this study put the finger on the core of values upon which we 
operate in this free society. 


What are they? I think we are well acquainted with them, certainly in 
a group such as yours, but let me run down the list. They all stem from 
one basic assumption. All those that follow stem from the assumption, 
which is that there is some significance in the individual human personal- 
ity. That is number one. Say the authors of this volume, if you look back 
through the history of American culture, and you look at what is happen- 
ing in America today, you can't help but come to the conclusion that most 
of us believe in the significance of the human personality and the dignity 
and worth of the individual human being. That seems to lie at the heart 
of it. Atheists, Jews, Protestants, Catholics, all should be able to agree upon 

From that number one assumption grow then the following assump- 
tions: Second, that the individual has the capacity to assume moral respon- 
sibility. If he is free, if there is any worth to his personality, if there is any 
significance to his personality, it follows that he must have the capacity to 
assume moral responsibility. 

Next, that institutions must be viewed as the servants of men, and not 
men the servants of institutions. After all, if the worth of the individual 
human personality is the central assumption, then it certainly follows that 
institutions must serve men, and not men institutions. 

Four, the validity of the idea of common consent as a basis for social 
action. On what assumptions do you predict the belief in common consent 
other than the assumption that there is some worth in the individual hu- 
man personality, and when you get a response from large numbers of in- 
dividual human personalities, you get a significant decision for the social 
group. It is based upon that original assumption, of course. 

Next is devotion to truth, say the members of the NEA study group. This 
is the tradition that truth will liberate the human mind and soul. 

Next in the list is respect for excellence in human achievement. If hu- 
man personality has some significance, then this follows inevitably — a re- 
spect for worthwhile and lasting human achievement. 

Seventh is moral equality. No one in this democratic society of ours has 
the moral right to injure another personality in terms of his growth and 

Then there is the idea of brotherhood. That is the concern of one person 
for another — the interest of all people in relation to each other. 

Ninth, the pursuit of happiness is a legitimate goal. If the individual 
human personality has significance, then it is proper to assume a reasonable 
goal for each person in happiness. 

Finally, the desirability of spiritual enrichment, which, of course, grows 
out of all of the rest of these and grows out of the very character of the 
individual human personality. 

If you accept this pattern of assumptions, if you assume these values, if 
you assume these hypotheses to be at the core of the American tradition, 
then the question is: how does it affect the philosophy and technique of 


administration, whether it be political administration, educational admin- 
istration, or economic administration? 

Ten Commandments of Good Organization 

Let us make a few applications here and see what we can make out of it. 
Are you familiar with the "Ten Commandments of Good Organization" 
published by the American Management Association? It is an admirable 
application of the ten values that I have just mentioned. You can't go 
through those ten commandments without realizing that they are very 
closely related to the ethical principles cited in the NEA study. 

Take number one: "A definite and clean-cut responsibility should be 
assigned to each executive." Have you stopped to ask the question why 
there should be? Philosophically — let's get off the pragmatic test for a min- 
ute — why is it important? Isn't it fair to say that with this kind of admin- 
istrative philosophy and technique each individual officer has a chance for 
his maximum growth and development and consequent contribution? This 
goes back to the first principle, the significance and worth of the individual 
human personality. 

Now, reverse it, if you will — take just the opposite of this proposition: 
That indefinite and vague responsibilities should be assigned. I once 
worked in an organization where I think this was the policy. I can't help 
but admit that it was an educational institution — and you know, I grew 
up on a college faculty, and I have the most profound respect for teachers — 
but on the whole, teachers are not usually good administrators. So you 
sometimes will find the worst administrative situations on college and uni- 
versity campuses. 

In the situation I mentioned, it seemed to be the policy that all assign- 
ment of responsibility was indefinite and vague. It was very difficult to find 
out what anybody was supposed to do. Philosophically, what is the sup- 
position out of which that grows? Well, it could be Machiavellian in char- 
acter; that it is easier to keep oneself in power if all assignments of respon- 
sibility are vague and indefinite, so you can play one person off against 
another in the game of chess, which the all-powerful kingpin in the organ- 
ization plays. 

Take the second commandment — "Responsibility should always be cou- 
pled with corresponding authority." Why? Because if you are looking at 
the problem from the standpoint of human personality, then it gives the 
individual human personality a chance to grow and develop and to achieve. 

Now, the opposite, of course, would be that authority should never be 
assigned to correspond with responsibility. Well, again, it is the same old 
Machiavellian philosophy. Keep the power in your own hands. Don't pass 
the power on, because you can control an organization much better if you 
don't assign the authority with the responsibility. 

Number three — "No change should be made in the scope or the respon- 
sibilities of a position without a definite understanding to the effect upon 


the part of all the persons concerned." This may be Utopian in some 
situations, but it is fundamental. It goes back to the principle of common 
consent that we were discussing a moment ago, when we were elaborating 
on the values that lie at the core of our tradition. It is fair to the people. 
That is the reason why it is legitimate and necessary in a democratic so- 
sciety. If we have fundamental respect for human personality, we can't 
come to any other conclusion. 

The opposite of this would be changes should be made at any time, with- 
out consulting anybody. It is a wise administrator — you have heard it, not 
quite put in this way — but it is a wise administrator who keeps his changes 
to himself and makes them quickly before anybody realizes what has hap- 
pened. I got caught once that way — and you know, it is a good thing to 
grow up on the inside, because if you have been on the receiving end there 
are some things in this administrative business you see more clearly than 
you would if you had just come in from the outside and had the respon- 
sibility forced upon you. 

If you make changes at any time when nobody knows anything about it, 
you keep everybody guessing, you keep them in your hands, and you have 
the authority where you want it. That makes the machinery work quickly, 
speedily, and with a kind of efficiency and brutality which makes the 
American system successful. Well, that is an overstatement perhaps, but 
you have known people who have operated administratively like that. 
Again, it is tied up with the Machiavellian conception of administration 
and not with the conception of democratic life which lies at the heart of 
our tradition. 

You are familiar with all of these "Ten Commandments of Good Or- 
ganization." I just want to apply a few of them. Take the one — "Differ- 
ences and disputes should be handled promptly." Now, anyone who has 
had any experience at all in administration knows there are certain ten- 
sions that develop. There are two ways of handling those tensions. You 
can set up the machinery so you can get speedy release, or you can just side- 
step them, and let them explode and let people fight it out. I have known 
and you have known some administrators who will not face those tensions, 
who will sidestep them invariably and let nature take its course. If you 
want to reduce it to a philosophy of action, it would be something like 
this: Well, it is wise to let nature take its course in these situations, because 
it is good for those boys to fight anyway. It does their souls good. It makes 
them tough. The best man always comes out on top, and that is the way 
to strengthen the machine. That is why you have a strong industry, or you 
have a strong department, because the best man comes out on top, if you 
let them fight. You don't want to coddle these people. 

If you are going to accept the philosophy of the significance of human 
personality we have been talking about, it is only common sense for the 
administrator to seek ways and means to release those tensions, so that 
the best in the individual can be applied to the problem at hand. 


Now, let us consider the principle that "Promotions, wage changes, and 
disciplinary action should always be approved by the executive immedi- 
ately superior." We have all seen in operation an opposite philosophy: 
Plan your wage changes in such a way that you always keep everybody 
coming to you, and then let them know it, of course. Manipulate the 
wages and the machinery so that everybody is responsible to you. Then 
things really happen, because you have complete control of the organiza- 
tion. If you pass the authority down to consider wage increases and pro- 
motions you will have democratic chaos. 

"No employee should be an assistant to and a critic of a person at the 
same time." Now, I happen to know a gentleman who is working in an 
administrative job. He always violates this one. The theory is that all you 
have to do is keep everybody criticizing everybody else all the time and 
things are bound to function. That is a little bit of an overstatement per- 
haps. It is based on an attitude of letting everybody "take it." It is good 
for their souls. It is a big man — this is the most polite way of putting it — 
who can permit his assistant to criticize him, and we want big men in our 

This is the last one I am going to mention — "Any official who is subject 
to inspection should be given the opportunity for personal evaluation." 
That is, he should be given all the machinery and all the devices that are 
necessary so that he can evaluate his own efforts and his own achievements. 
If he is going to have somebody come in and inspect him from the outside, 
he ought to have the privilege of self-inspection. You can see what grows 
out of the assumption of the dignity and the worth of the human per- 
sonality; that people are fundamentally honest; that, after all, we have 
the capacity to develop moral responsibility; that we will discharge that 
moral responsibility in a given situation; and therefore we ought to be 
free to do it. 

Of course, the opposing view is that this is very dangerous. Never let 
the man know how you evaluate his behavior, because as soon as he finds 
out he is like a kid in a school room. As soon as he finds out how the 
instructor grades, it makes a whole lot of difference in what he does. His 
whole problem then is how to whip the system; so never let anybody know 
how you evaluate behavior. Never let your subordinates know what you 
are judging on, because as soon as they find out, it becomes a game of wits — 
who can outwit the other fellow. That is the worst thing that could happen 
in an administrative relationship. 

The Fellow Across the Table 

I am not trying to suggest which philosophy you want to embrace. But 
for myself, I have very conscientiously over a period of time tried to de- 
velop a set of ethical values in administration to guide me. It is one thing 
to enunciate these principles, and it is another thing actually to work in 
harmony with them. 


Here is a little device I have used myself, and I think I can say it has 
saved me from difficulties that I otherwise should have suffered. Tensions 
develop — they are inevitable. They may be over hours of work (schedule 
of classes in this case); they may be between two Deans, or between an 
instructor and full professor. Think of your own situation. Tensions al- 
ways develop. The worse troubles always get on the President's desk (or 
on your own). How are you going to face the problem? 

You can just drive your way through it, be brutal about it, and seek 
what seems to be at the moment a solution to the problem without ever 
scratching the surface. It seems to me the only protection that you have, 
and the person sitting across the table has also, is for you to sit down and 
in true humility — I mean this most sincerely — try to put yourself, feel your 
way into the position of the fellow across the table. 

This is at the heart of the problem we were talking about. If you or I 
have fundamental respect — that is, if we believe in the dignity and the 
worth of the individual human personality — we will sit down and try to 
feel our way into the emotional responses of the individual across the table. 
If you do that sincerely and every time — I don't care what your job is, I 
don't care with whom you work — if you can sit down and actually accom- 
plish that for yourself, it will make working life much more productive 
and enjoyable. 

So it means control. It means keeping hold of yourself. It means having 
this philosophy that we have been talking about so thoroughly a part of 
you that emotionally, as well as intellectually, you respond in terms of the 
assumptions that we have been talking about. 

I wouldn't give a nickel for all of the books that have been written about 
administration and the principles of administration we have been talking 
about if you turn over to me a person who hasn't committed himself per- 
sonally to a philosophy of personal and group living which allows everyone 
to live, work, and contribute to the general good. 

I don't think we will ever solve the problems of governmental admin- 
istration in any of the departments in which you work or the problems of 
educational and industrial personnel until we can turn out men and women 
who are more completely devoted to this kind of personal and social phi- 

That is all I have to say, but I feel it most deeply and most sincerely. 
You people are working in this field professionally. We all get attached to 
a certain kind of professional jargon, and sometimes we lose the heart of 
the whole thing in our attachment to the superficial. It seems to me that 
our real problem is to go behind the code and look at the heart of the 
matter in terms of the philosophy of personal and social life which is ap- 
propriate to the democratic society in which we have been born and reared, 
and in which we hope we may participate in the future. 

Approaches to the Study and Practice of Management 

Since management is the integrating force within a group undertaking, 
Sessions conceptualizes the necessity of "generalists" in management. The 
view here is that managers are required who can identify the variables, 
understand their relationships, and exercise judgment in terms of the whole 
enterprise. The Air Force Manual sets forth the tenet that management 
involves more than conceptualization and decision making: The justifica- 
tion of management requires more than a mental activity — it involves ac- 
tion or the stimulation of an action in a more physical sense. In this light, 
management is viewed as a process, eventually measured in terms of group 

Within this general framework, two basic approaches prevail: the quan- 
titative and the humanistic approaches. The quantitative approach treats 
the highly measurable aspects of individual and group behavior and as- 
sumes organizational rationality. This approach is highly logical and em- 
ploys the framework and techniques of the scientific method. Based upon 
abstractions, it permits the objective examination of the web of primary 
relationships existing in a problem area. Fetter discusses the basic aspects 
of the quantitative approach and presents a specific example of its use. 

While the quantitative approach assumes organizational rationality on 
the part of the individual, the existence of personal rationality which may 
be in conflict with organizational rationality must be recognized. Human 
relations in management deals with the nonlogical value system of man 
as he behaves in the work environment. Hayes elaborates upon such con- 

Roethlisberger discusses the problems of achieving better utilization of 
human resources through application of human relations techniques. Mc- 
Nair takes a stand which may be unacceptable to many advocates of human 
relations. Nevertheless, it is insight such as his which will force the social 
scientists and practitioner of human relations to thorough, disciplined in- 
vestigation and application. 



General Points of View 

There is an urgent and growing need for the generalist in management 
and for a more precise understanding of his role. The difficulties of his 
position are only increased by the suggestion that a generalist is one who 
knows a little about everything. Without discounting the importance of 
breadth of knowledge as such, this resource is doubtless more useful for 
general conversation than general administration. 

During the past three decades much progress has been accomplished 
with respect to the techniques of coordination that are associated with the 
craft of general management. Where these have proved most effective how- 
ever, they are usually the outgrowth of conditions peculiar to the firm or 
institution and are correspondingly limited in their more general applica- 
tion. It continues to be the fact that the chief executive officer who out- 
standingly excels at his task is more likely to do so by virtue of rare gifts 
of insight and a superabundance of energy; too frequently he lacks a firmly 
established doctrine which informs him about the qualities of his role and 
the values that can be derived from a philosophy of operation as a gen- 
eralist in management. 

This subject can perhaps best be identified as part of the increasing 
trend toward integration, manifesting itself in virtually every branch of 
social and physical sciences. Fortunately by now this trend includes a con- 
siderable amount of successful experience in bridging the schism that was 
thought traditionally to divide the social and physical sciences in two 
major but separable categories of inquiry. In its most ordinary manifesta- 
tion one may note the relief with which the layman comes to realize that 
the many specializations in medical practice have been composed and or- 
dered in great clinics. The result is to return to the patient an institu- 
tionalized facsimile of the general practitioner. Similarly in agriculture a 
bewildering array of technical subject matter has been reconciled for the 
farmer through the development of the concept of the unified farm man- 
agement system. 

If it be true that the 1920's marked the heyday of the specialist then 
surely the 1950's is a decade in which an increasingly high premium will 
be placed on the arts of synthesis and a science of integration. 

Robert Sessions, Cost and Profit Outlook, Vol. IX, No. 4 (April, 1956) pp. 1-4. 


Integration as a Management Goal 

In the field of management this premium will be especially great. The 
range of specialized skills available to any firm or institution is proliferat- 
ing. The list of definitions of special expertness within the established pro- 
fessions continues to grow; and the technical content of many new fields 
has become enriched to a point enabling them to bid for professional status. 
It is true that these — individually and together, represent new facilities 
for problem solving; but a new and more difficult problem is created by 
their very number and diversity. 

The essential problem for the generalist in management therefore arises 
from considerations of two kinds. First, of course is the vastly increased 
complexity of the makeup of problems and the context in which they oc- 
cur; but most frequently the new spheres of expertness (which could be 
mobilized in relation to the facets of any such problem) have developed 
faster than they can be unified, organized and directed. It is not enough 
to say that greater success has been achieved in perfecting the means of 
problem solving — than in solving problems. The greater cause for concern 
is in the evidence of failure in so many departments of human affairs that 
could have been averted by the presence in the picture of a generalist in 
management who was up to his job. This is true in the administration of 
religious organizations, educational institutions, and agencies at all levels 
of government. It is also true of even major factors in the business com- 
munity. Hence, for the purpose of this analysis special emphasis will be 
focused on the sphere of private management as it operates within the busi- 
ness community. 

The Zone of General Management 

Who then is this generalist in management? What is the best and the 
most that we can say to him as to the distinguishing characteristics of the 
problems he must confront? What are the origin and the quality of the 
authority he can employ in resolving such problems? And what does this 
in turn suggest as to the strengths and limitations of the methods that can 
be developed for carrying out the decisions he must make? 

We had best begin with this comment on the obvious: that the zone of 
general management is the only point from which an organization can be 
clearly viewed in its entirety. It is here that relationships can be observed 
between and among the individual units of the structure; the effects of a 
decision weighed — not in isolation, but with regard for all of the variables 
in the larger equation. Environmental factors can be assessed for their 
bearing on company growth, and limitations in resources thus reviewed 
more realistically. 

Contending with Variables in the Decision 

For the problems general management must face therefore, all of those 
lines are irrelevant which normally separate finance, production, market- 


ing and the other areas of special responsibility. An issue involving plant 
expansion or location, for example, cannot be considered as a problem of 
construction and design and transport. It entails, rather, an appraisal of the 
supply variable in its relationship to the expansibility of markets, capital 
structure, the status of union contracts — and so on. 

Consider for example, what happened to an important export market 
of a large, old-line manufacturer of pharmaceutical products. This concern 
was well established in Brazil by 1940. The market was thin because of low 
purchasing power, but sales were profitable enough on the basis of limited 
distribution. The entire operation entailed simply the transport of a full 
line of finished products, their promotion through physicians and their 
distribution through drug store channels. All of the variables in the Brazil- 
ian operation could be clearly visualized: Sales were small because of the 
premium prices to be had from those who could pay; physicians and drug- 
gists welcomed and were glad to promote the quality merchandise available 
only by import; and the government — while revolutionary on political 
lines — was conservative enough on matters of internal economics. All of 
these elements or variables in the Brazilian market — were consistent with 
a bedrock company policy, namely: no plant investment for local manu- 
facture outside the United States. This policy had the status of a constant 
in their total equation. 

Change came fast with World War II, in the form of accelerated indus- 
trialization, the growth of cities, and the expansion of mass purchasing 
power. Within five years company sales were multiplied many times. The 
variable of purchasing power had changed radically, and in a favorable 
direction — but all of the others remained the same. The company could 
take pride in its greatly improved profits and read in them sufficient proof 
of the wisdom of its policy precluding investment in foreign plants with 
the supposed risks and inefficiencies of such a venture. 

What management failed to note, however, was the entrance of a new 
variable into the equation — and the effect of this in turn upon another. 
The new variable was the strain on the economy of the country resulting 
from the flight of capital taking place by the fantastic purchase of im- 
ported goods. The climax occurred when the aging dictator — Vargas — 
imposed rigid exchange controls and inaugurated a policy which required 
local production of virtually all categories of consumer and industrial 
goods. The consequence of this action — within six months — was to reduce 
sales to their prewar minimum. 

This failure was not because of any lack of special expertness in eco- 
nomics, political science, fiscal policy, or Latin culture. Nor was it due to 
inexperience in the modern specialized techniques of production, mer- 
chandising and industrial research. Plainly and simply, what happened 
was a failure of general management and it cost the company many mil- 
lions of dollars annually in profitable sales — aside from the loss of market 
position which will be even more costly to regain. 


The first requisite of the generalist in management, therefore, is to be 
able to identify variables in the context of a required decision; and so to 
inform himself as to their changing values and relationships that he can 
achieve a final judgment for the best interest of the company as a whole. 

The Quality of Managerial Power 

This view of the characteristic problem would be intolerable if it were 
not for another and equally important consideration: that is — that opti- 
mum power resides, potentially, at the level of general management — and 
can be mobilized to assess variables and to carry out judgments based on 
their resolution. Such power can disappear entirely if not exercised; it can 
be dissipated and lost — if poorly timed or misdirected. 

From this it follows that: a clear understanding of the origin, the quality 
and the inherent limits of his power — must stand as the second requisite 
of the generalist in management. 

The relevant power principle is embodied in the simple concept of 
agency. One cannot operate on the assumption of personal power — even 
if he owns the business. He may not act as though personal power accrues 
to him from his position — whatever its level. He may only act as an agent, 
and his mission can only be performed in behalf of the enterprise as a 
whole. Sir Josia Stamp once remarked that the price level is so subtle, that 
"like silence, it can be broken by merely mentioning it!" And so it is with 
power in management that can be lost by even thinking of it! 

In these terms, there is only the difference of degree in the authority that 
can be asserted from the highest and the lowest points in any hierarchy. 
Each can make judgments and take action within the limits of his agency 
whether he presides over squirrels as ground keeper, or over members of 
the executive committee as president or general manager. The greater 
power that attaches to the second of these positions derives solely from the 
fact that from that point in the organization more variables can be resolved 
more favorably in behalf of the enterprise as a whole. 

All of us are familiar with the unsavory situations that can develop 
wherever the subtleties of the agency relationship are not understood or 
observed; for example, where a ranking officer arrogates and asserts per- 
sonal power; or where subordinate officers seek power in the same terms. 
Inevitably in such a case, the insecure become linked with the dominant; 
factions spring up; intrigues fester and spread. Creative energies are squan- 
dered in the dreary forms of political maneuver, while the legitimate affairs 
of the enterprise must sit at second table. 

It is axiomatic that in any organization, individuals can best accept each 
other in their representative capacities — in which all can acknowledge the 
enterprise as the party of the first part. What can then bind them together 
is a contractual relationship growing out of their willingness to be bound. 
Wherever this is the case, the fabric of organization becomes a network of 


With all deference to Maitland for this matchless phrase, this fabric of 
agreement can never become "a seamless web." The important parts of the 
contract are never official. They do not even exist in fine print. They are 
always between the lines and are in a state of perpetual amendment. Per- 
haps the most important clause in this informal but inclusive contract con- 
cerns how well general management is expected to perform. Surely this is 
the clause most frequently amended. 

In summary to this point, we may say that: the generalist in management 
can employ the power that derives from his ability to influence favorably 
those variables that affect the entire enterprise; that such power is prop- 
erly conceived in terms of an agency relationship which he shares with each 
member of the concern; and that the organization can achieve cohesion 
only by the agreement of its members to cohere. 

Negotiation as a Method of Management 

If these considerations describe the origin, the quality and the limita- 
tions in a power principle for our generalist — they suggest also the method 
of its application. The method is negotiation. The transmission of power 
by command is a concept that has gone with the opera cape. To take its 
place is the process of informing and seeking information, of invoking par- 
ticipation, of achieving new levels of understanding and consent. 

It is only by this process that staff services can be realigned for more 
proficient investigation and analysis; or assigned responsibilities expanded 
or abridged. The third requisite of the generalist in management, there- 
fore, is that he be skillful and patient as a negotiator; for if he is, he can 
mobilize the resources of knowledge and experience with which to ap- 
praise the variables in the decisions he must make and he can earn the 
agreement and consent of those who must participate in their execution. 

Marketing — the Key Variable 

There is, however, a fourth requisite — approached with some diffidence 
because of the relative youth of the subject matter and methodology of 
the field involved. The generalist in management will be best equipped if 
he is soundly grounded in marketing. We know, of course, that we live in 
a market-oriented economy. This means, among other things that as a doc- 
trine of survival — the better mousetrap theory is more for mice than men. 
It means too that the term conservative — as applied to business manage- 
ment — can only refer to the process of conserving a position in the market. 

For general management we are saying in substance that the market is 
the most important of all the variables in any decision that affects the 
stability or growth of the enterprise. When this variable has been assigned 
its proper value, all of the other factors such as size and location of plant, 
financial structure, and so on — become dependent variables. The size, dis- 
persion, and expansibility of the market can be determined. The costs of 
generating demand can be rationalized in terms of available resources. A 


timetable for the program can be tested and established. All of these steps 
can be planned with knowledge of the firm's existing competitive posi- 
tion — and with the objective of improving that position. These are ele- 
ments in the marketing variable which were scarcely dreamed of 40 years 
ago — or toward the end of what we may call the Stone age of management. 
Today, of course, the techniques have been highly developed and a mature 
body of doctrine exists for marketing strategy, and tactics. 

Great joy on this front should be tempered by one strong misgiving: and 
that is — that members of the management fraternity are still somewhat in 
the position of the esquimaux and other primitive people. We enjoy sim- 
ply having around us many of the modern management devices — and have 
become highly proficient in the use of certain of the gaudier ones. But on 
matters of really fundamental import are we not likely to approach policy 
as though it were a totem pole, to rely on walrus horn technique, and in 
time of crisis, much given to swift flight in the dark? 

Integration as the Goal for the Whole Enterprise 

It should not surprise us that such indeed is all too frequently the case. 
Our economy was scarcely one fourth its present size when most of the peo- 
ple who are aged 60 today, took their first jobs. For that matter, the most 
difficult problems in management result from technological innovations of 
the past 15 years. From so great a thrust of growth and compulsive change 
— a host of new variables must figure in every management decision. It is 
indeed true that these can now be matched with an array of tested tech- 
nique and analytical method — but they also are the product of the very 
recent past. 

This, then, returns us to the thought with which this paper was begun. 
We seem to have reached a stage in which the further maturity of manage- 
ment depends upon the acuity and facility with which it can mobilize the 
fullest range of expertness and special knowledge. And the continued de- 
velopment and refinement of technical knowledge and method depend in 
turn upon the opportunities that can be provided for their practical ap- 
plication. The inference of this state of affairs is inescapable. The arts of 
synthesis and the science of integration cannot be developed solely from the 
top down. Indeed, the objectives of general management can be achieved 
to best advantage only where all of the officers and technical staff fulfill 
the requisites of the generalist as we have defined them today. 

Here we encounter the touchiest problem of all. The key technical per- 
son is not always the first to identify the variable for which his expertness 
is uniquely adapted, nor is. he always the most eager to subject it to the 
crucial test. He is not entirely immune to ambition for status nor loath to 
promote it without regard for the over-all interest of the enterprise. And 
need one add that he is sometimes less than flexible in the give and take 
of negotiation? These are negative attitudes. Where they exist the result 
is to atomize the effort and purpose of the enterprise. But when they be- 


come positive, the result is to liberate a force .that can only be termed 

The achievement of this result is the greatest challenge facing general 
management today. We are concerned with: The substitution of rational 
method for intuition and taboo; the uses of power for constructive ends; 
the employment of democratic process in decision-making; the impulse to 
intellectual growth in response to an environment of change. These are 
value standards that have universal validity. They are our legacy from 
Greece. Our success in their more fruitful application will earn us the 
gratitude of freedom-loving people all over the world. 


For Air Force purposes, management is defined as a process of organizing 
and employing resources to accomplish predetermined objectives. 

The over-all objective of Air Force management is to achieve maximum 
operational effectiveness in accomplishing the essential missions assigned. 
An operation and the management of an operation are both means to an 
end, namely that of accomplishing something. This something for which 
we undertake an operation is called an objective. The extent to which we 
reach the desired objective is called effectiveness of an operation. Effective- 
ness thus has no meaning except in relation to the objective we want to 

The proof of success of management is operational effectiveness. Even 
the most logical organization charts, planning schedules, manning docu- 
ments, and other managerial devices are worthless unless they do the job 
they are intended to do. Introduction of theoretically "good" managerial 
devices which do not produce the desired result may even be dangerous, 
because they suggest that things are being done well simply because the 
organizational element operates under such "good" management. 

Poor is the engineer who justifies his design of machinery only by saying 
that it incorporates the best mechanical features. A good engineer proves 
that the machine he designed makes the desired product better or cheaper 
than any other machine available. That is the test of acceptance or rejec- 
tion of machinery; it is likewise the test of acceptance or rejection of man- 
agerial devices and means. 

All activities in the Air Force are related to the roles and missions 
assigned to it by higher authority. To accomplish an assigned mission, we 
must define what the mission is, who is going to do the required work, 

* Department of the Air Force, The Management Process, AFM 25-1 (September, 
1954), pp. 2-3, 6-7. 


and who will be responsible for carrying out the operations. We have to 
translate the expected accomplishment into plans and programs of "how 
much of what is necessary to produce by what time" — that is, to establish 
production goals and to schedule work to reach those goals. 

The command line organizes the work, supervises it, and delivers the 
end product. In the process of organizing work, commanders must be alert 
to conserve resources — to produce a maximum volume of end-results with- 
out waste of resources and time. To this end, each commander must use 
efficient ways for doing things. The delivery of end-results of work must 
be evaluated in terms of their correspondence with the requirements, in 
volume, quality, and time, as established in the assigned mission. This 
evaluation is the basis for judgment as to whether the commander — as a 
manager — performed what had been expected. This leads us to the ques- 
tion of what a manager does. 

What Does a Manager Do? 

A manager is a person who makes things happen, through the efforts of 
other people! In so doing, he is primarily concerned with obtaining re- 
sults. Within the United States Air Force, managers are our commanders 
at all levels, deputy commanders, chiefs of staff, and supervisors who must 
see to it that results are achieved through the efforts of subordinates. 

The pilot flies; the artist paints; the doctor practices medicine; and each 
of them performs a series of actions, or "functions," which are peculiar to 
his work. This is also true of the manager. He performs functions which 
are characteristic of management. For Air Force purposes, management 
action is subdivided and classified as planning, organizing, coordinating, 
directing, and controlling. These are the five "functions" of management 
that are performed by every manager at every level. 

You can get a broad view of the content of these functions by focusing 
attention on the type of questions which a manager must ask himself. In 
working out and implementing answers to these questions, that person 
will perform the functions of management. 

What is to be done? This question is concerned with planning objectives 
and defining specific goals to be reached by a projected operation. It is 
here that the broad aspects of workload are determined — how much of 
what will be done. 

Two Approaches to Managerial Actions 

A managerial action stems from the desire or need to make changes in 
a setting in order to adapt it to some new purpose. These changes in the 
setting are introduced by developing or modifying some procedures. The 
manager's reasoning, which underlies his approach, is conditioned by his 
point of view, his outlook, and his indoctrination. Broadly speaking, the 
fundamental approaches may be classified into two diametrically opposed 
concepts. We may call these concepts the static and the operational. 


A manager indoctrinated in the static approach to management views 
all managerial actions as a matter of application of principles, concepts, 
and techniques which stem from the ideal pattern of management. Some 
people tend to assume that, if they apply these logically, they will invari- 
ably produce the best results or yield the most appropriate solution to the 
problem. The "principle of straight-line flow" of work illustrates an ex- 
ample of this approach. Arrange for it, this principle implies, and the best 
and most efficient flow of work will be achieved. 

The operational approach, on the other hand, rests on the premise that 
the end-product or goal to be achieved is the paramount consideration in 
designing an organization, developing procedures, or directing operations. 
Managerial action is geared to the nature of the objective rather than 
oriented toward ideal patterns which may or may not fit. It further pre- 
supposes that each problem or situation has some elements that are unique 
and that each, therefore, must be evaluated in its own setting. This setting 
is ever-changing under the impact of managerial actions. This approach 
rejects the possibility of developing ideal patterns of solving managerial 
problems — patterns which invariably produce best or desired results. 

The first approach is usually classified as abstract and static, the second 
as operational and dynamic. The static approach looks pretty on paper 
with all odds and ends neatly tucked in. It appeals to our sense of order- 
liness. Unfortunately, however, it does not help us much in solving prob- 
lems. The dynamic appoach, on the other hand, is not neat; it is often 
messy looking. The odds and ends stick out. But it helps us to see our 
problems as they really are. 

Obviously, it's harder to visualize and organize work in a dynamic situa- 
tion than in a static one. The elements of a static situation fall neatly into 
well-placed cells and categories of ideas. The difficulty with this approach 
is that it is detached from reality. A person who knows the management 
process developed along abstract lines but does not consider the practical 
situations with modifying conditions usually has a hard time organizing 
an actual operation. He is often frustrated by the fact that the operational 
interdependence of and interactions among the factors play havoc with the 
neat categories he has learned. 

To manage an operation requires a realistic attitude toward the problem 
at hand, the resources available, and the procedures best adapted to reach 
the assigned goals. To rush into doing things without realistically evaluat- 
ing the specific situation is just as bad as trying to apply solutions which 
were developed elsewhere for different problems and in different situations. 

Air Force management cannot afford either a complete attitude of dar- 
ing — a headlong burst into activity — or the doctrinaire approach to prob- 
lems. These two extremes are not compatible with the managerial process. 
It can profit, however, by pursuing the realistic viewpoint which character- 
izes the operational approach. The application of this approach culminates 
in building and developing the operational system. 


The Quantitative Approach 


The application of "scientific method" to problems encountered by busi- 
ness managers has long been claimed, but only recently substantiated in 
any way by practice. Whether or not the solutions of management prob- 
lems can ever become "scientific" is certainly a matter for both concern 
and dispute. Only in severely limited problem areas has any serious at- 
tempt been made to quantify decision processes, and even in these areas 
only limited success has been obtained. This paper will attempt to place 
the "science" in "management science" in its proper perspective and hope- 
fully to point the future direction of the growing research interest in this 

Scientific Method in Management 

Scientific method implies observation, hypothesis, testing, and control. 
The situation under analysis must be observed. That is, it must be defined 
in terms of both the activity involved and the objective sought. Then a 
theory, a hypothesis, which attempts to explain the way in which the ob- 
served process operates in giving rise to output is fomulated. This theory 
is made specific through measurement of the defined variables as they oper- 
ate in the situation. Then the theory is tested by actually determining 
through prediction how well it explains the situation which it is supposed 
to describe. If the theory can be established as valid in the given situation, 
then it can be used by management to predict and control the output of 
the process involved. The key to the application of scientific method to 
decision processes lies in the word "measurement." Measurement of the 
values of the relevant variables must be effected in order to understand, 
predict, and control. 

For example, consider a decision process where one must decide on the 
number of units to carry in a raw materials inventory. Here, the variables 
of interest are the demand for the material, its purchase price, the cost of 
carrying it, the delivery time, the effect of this investment on the invest- 
ment program of the firm, the quality level which can be obtained by the 
available suppliers, and a host of other relevant variables. Some of the 

* Robert B. Fetter, "Management Science: The Quantitative Analysis of Management 
Problems," The Manager's Key, Vol. XXXI, Indiana University, (May, 1957), pp. 25-30. 


variables can be measured directly. For example, the purchase price usually 
falls in this category. Some of these variables are capable of direct, but 
uncertain (probabilistic) measurement, as, for example, the demand for 
the material. Others are not capable of direct measurement at all, as, for 
example, the effect of this investment on the firm's stock of capital, but are 
usually the subject of judgment on the part of the management. 

History of Applications of Scientific Method in Management 

It has only been recently that serious attempts at model building (hypoth- 
esis) have been attempted where the aim was to solve the economic de- 
cision problems of management. Some attempts were made to formalize 
inventory problems in the 1920's, but it was only recently that the uncer- 
tain nature of some of the relevant variables was formally taken into ac- 
count. 1 Models for the purpose of allocating resources to alternative out- 
puts have been proposed for the economy as a whole, 2 and recently for the 
solution of such problems at the level of the individual firm. 3 However, 
here no satisfactory way of taking account of uncertainty in the level of 
the relevant variables has yet been devised. Most of these programming 
methods are also quite laborious computationally. 

The use of probability theory in the solution of certain economic deci- 
sion processes has been proposed for some time, 4 but only recently imple- 
mented in any significant way. The solution of many inventory problems 
and servicing problems has recently been aided quite materially by the 
use of probability theory. 5 

Recent advances in the field of sampling theory and statistical inference 
have done much to point the way toward more efficient decision processes. 6 

The advent of large-scale computers has been of especial significance in 
furthering the use of quantitative methods for management. They have 
made routine the processing of the large amounts of data necessary to the 
model building process. The solution of many programming problems 
could not even be attempted without high-speed computers. Difficult an- 
alytical solutions require the calculating ability of these machines in order 
to be economic at all. Also, many problems too difficult to solve or formu- 

1 T. M. Whitin, The Theory of Inventory Management (Princeton, N.J.: Princeton 
University Press, 1951). 

2 W. W. Leontief, Structure of the American Economy, 1919-1939 (2nd ed.; New 
York: Oxford University Press, 1951). 

3 T. C. Koopmans (ed.), Activity Analysis of Production and Allocation (New York: 
John Wiley & Sons, Inc., 1951). 

4 T. C. Fry, Probability and Its Engineering Uses (New York: D. Van Nostrand Co., 
Inc., 1928). 

5 R. B. Fetter, "Some Applications of Probability Theory to Manufacturing Prob- 
lems," Proceedings of the 7th National Conference, American Institute of Industrial 
Engineering, 1956. 

6 Thrall, Coombs, and Davis, Decision Processes (New York: John Wiley & Sons, Inc., 


late analytically may often be solved approximately by simulation on a 
high-speed computer. 

The Analytical Viewpoint in Management 

The first stage of analysis involves observation of the situation under in- 
vestigation. One must understand the context of the problem in order to 
define it. During this stage, a measurable objective must be established, 
and it is this measure of effectiveness which justifies the analysis. 

In any business firm, there are several levels of objectives which are 
sought. The particular objective sought in a given situation depends on 
the organizational level at which the ultimate decision is made. It is not 
usually possible to make decisions which maximize the profit of the firm, 
at, say, the departmental level within the production function. A foreman 
"sub-optimizes" relative to the organization as a whole when he makes his 
scheduling decisions. That is, he may try to minimize the time necessary 
to produce an item, given some equipment, labor, and material constraints 
on his decisions. Under certain conditions, this may be equivalent to mini- 
mizing the cost of production, but this is not a necessary consequence, using 
such a criterion. It is not at all clear that the use of such a criterion would 
maximize the profits of the firm in the long run. The problem of making 
certain that lower-level objectives are consistent with those on higher levels 
is primary whenever decisions are being made. 

In the inventory problem mentioned previously, the objective sought 
might be an ordering and stocking policy which would minimize the cost 
of supplying the given item for use in production. This is probably a rea- 
sonable objective, but its consistency with the goal of maximizing profits 
might be suspect if, for example, the cost of carrying inventory was not de- 
termined, based on the firm's total long-run investment situation, but only 
based on the cost of obtaining the necessary sum independent of other 
capital requirements. 

Once a measure of effectiveness has been selected as appropriate to the 
given problem, some hypothesis or hypotheses must be formulated. At this 
stage, insight, imagination, intuition, and experience are brought to bear, 
in order to construct a model which describes and explains the situation 
under investigation. This model could be verbal, graphical, physical, or 
mathematical, depending on the requirements and constraints of the situ- 
ation as well as the skill and ability of the model builder. This process of 
model building or abstraction involves a selection of the variables which 
affect the situation and an attempt to arrange them in such a way that' they 
provide an explanation of the behavior observed. 

In the inventory problem described previously, a proposed model of the 
situation might say that the cost of inventory is a function of the reorder 
point and the quantity ordered, given the ordering costs, carrying costs, 


usage, purchase price, cost of running out, and ignoring other variables, 
that is: 

TVC =f(R,Q\S, Y, I, C, D) 


TVC = Total variable cost, 

S = Ordering cost per order, 

/ = Carrying costs per time period, 

Y = Usage (rate), 

C =1 Purchase price per unit, 

D = Cost of running out per order period, 

Q = Order quantity, 

R = Reorder point. 

Then it would be necessary to decide on the appropriate arrangement of 
these variables, that is, how do they affect total variable cost? Having done 
this, the model might look like the following: 

TVC = sJL + IC [-|- + (R - M)] + D*p(x) , 

M = expected use during reorder period, 

p(x) = probability of demand exceeding R during any order period. 

Here, the form of p(x) would have to be evaluated, and then the values of 
R and Q which would attain the objective of minimum cost could be found 
by setting 

* (TVC) = . B (TVC) 
B Q d R 

While such a model as this may be helpful in analyzing certain inventory 
situations, it is far from exact and may be useless in many situations. It 
includes a complex probability which would be quite difficult to measure 
and formulate analytically. The probability of running out in any order- 
ing period depends on the variation in demand as well as the variation in 
delivery time. It is doubtful whether a simple expression for this could be 
found. Whether it would be worth while or not depends on the kind of 
cost savings which could be made relative to the cost of devising and solv- 
ing the model. Management science has a long way to go in formulating 
complex situations for quantitative solution. Education in this work among 
students in economics and business is just not widespread. It is, however, 
necessary that educational efforts in this direction be strengthened, since 
the construction and solution of decision models for management use is of 
primary importance to future gains in business efficiency. 

Once a model has been constructed, it is necessary to test it against em- 
pirical evidence to ascertain its validity in explaining the observed situa- 
tion. If one assumes that the inventory model previously described had 


been formulated satisfactorily, predictions would be made based on the 
model and attempts made to determine, either by actual or simulated ex- 
perience, whether the predictions would be substantiated if the model were 
applied in the actual situation. If not, the model must be rejected and a 
new or modified explanation sought. It is in this area of testing hypotheses 
that much of business theory is weakest. All too often explanations of busi- 
ness phenomena are accepted because they are plausible and not neces- 
sarily because they are successful in actual use. 

Finally, once a model has been proved as usefully describing observed 
behavior, then it becomes a device for understanding, prediction, and con- 
trol in the given situation. At this point, the abstraction has become a 
useful tool of management. 


The use of the scientific method applied to management problems is 
just now approaching a state where its true nature is being recognized. The 
essential key to its use is the ability to measure and to test theories of busi- 
ness behavior. Economic decision processes can be aided and improved by 
rational quantitative analysis, but much work at all levels from basic re- 
search to application to specific business problems remains to be done. 


In listening to two theoretical talks delivered before the first annual 
meeting of the Institute of Management Sciences, I was struck that both 
Professor Hertz and Professor Marschak went quite far in eliminating peo- 
ple from their management theories. For example: Professor Hertz stated 
that "the goal (note, The Goal) of the administrator is the achievement 
or maintenance of some relationship between the input and output sets 
over some sequence of time intervals" (I am quoting from his two page 
summary). Here the objective, and apparently the only objective of the 
administrator, is described as a certain performance of the organization 
relative to inputs and outputs. 

In similar vein, Professor Marschak spoke of the information needs of a 
team, 1 and stated that it is not necessary for optimal performance of an 
organization that all members should have all the information available. 

* Samuel P. Hayes, Jr., "Behavioral Management Science," Management Science, Vol. 
I, No. 2 (January, 1955), pp. 177-79. Delivered, as a symposium paper on "Management 
Science Tomorrow," before the first national meeting of the Institute of Management 
Sciences, October 21-22, 1954. 

l See J. Marschak, "Elements for a Theory of Teams," Management Science, Vol. I, 
No. 2 (January, 1955). 


Here the emphasis is on the logical needs of team members, with little 
regard for their psychological needs. 

The model building of the future will be characterized, I believe, by 
increased emphasis on certain psychological and social aspects of organiza- 
tions which are already receiving considerable attention, although they 
appear to be minimized by Professors Hertz and Marschak. Two such as- 
pects are: 

(1) The multiplicity and variability of the motives of administrators. As 
indicated by Professor Flood's report about the industrial psychiatrist, 2 
administrators do not uniformly seek simple input-output relationships. 
They seek other things too, such as security, prestige, or self-aggrandize- 
ment, often ahead of input-output relationships. An adequate management 
science of the future has to take these other objectives into account, learn 
to identify and measure them, find out how they interact on each other, and 
determine how situations may be set up in which these motives may be 
utilized to serve whatever objectives are fixed for the organization by its 
controlling body. Whether models can be developed that adequately take 
these multiple motives into account, I don't know. I would suggest that 
models will not be very useful if they don't. 

(2) Psychological maintenance of the organization. The second aspect 
to which increased attention will be given in the future has to do with 
people also. 

Research on groups has already indicated pretty clearly that adminis- 
trators must concern themselves with matters other than the performance 
of their organizations. They must concern themselves also with the main- 
tenance of their organizations. Even a machine needs oil, repairs, replace- 
ments. So does an organization. 

This requires attention to the needs of the people in the organization. 
They may not need much information to be able to do their jobs properly, 
as Dr. Marschak pointed out. They may need it to want to do their jobs 
properly, as a number of empirical researches has suggested. 

Even the simplified two-man team Dr. Marschak described yesterday 
would, in real life, have to spend some time and energy reinforcing its 
bonds, intercommunicating and consulting between its members for pur- 
poses of morale (not just for efficiency in performance) and in other ways 
maintaining a relationship that cannot simply be assumed to persist. 

Teams — like men — do not live by bread alone. Moreover — and this is 
the major point, I suppose — some of the inputs must be devoted to organ- 
ization maintenance, and some organizational decisions must be made with 
the same end in view, or outputs will fall off markedly. Yet, we certainly 
don't know enough about the character, costs and effects of these kinds of 
psychological maintenance inputs to fit them into modern mathematical 

There is much management science today, and there will be more to- 

2 See M. Flood, "Decision Making," Management Science, Vol. I, No. 2 (January, 1955). 


morrow, of course, having great utility whether or not it is fully taken 
into account in such models. Let us take a quick look at certain behavioral 
management sciences of the future, quite apart from model-building. 

First, the science of personnel management. Personnel administrators of 
the future will not only have data on the physical and psychological re- 
quirements of existing positions in their organizations. They will also 
have developed a series of normal or ideal careers within the organization — 
a longitudinal as well as a cross-sectional job description. In selecting, train- 
ing, assigning, promoting and finally retiring employees, they will utilize 
a wide variety of types of information — both about the man and about the 
normal progressions of situations which constitute his possible careers in 
the organization. 

Continuous evaluation of continuously increasing masses of data about 
employees and about situational needs in an organization will be per- 
formed, no doubt, by electronic computers which promptly and accurately 
inform the administrator that Employee "A" is ready for training and pro- 
motion; Employee "B" has reached the limit of his capacities; Employee 
"C" will become an outstanding executive, but only in a situation where 
authoritarian actions are appropriate; Employee "D" has reached retire- 
ment age, but is good for ten more years, etc. 

Second, the science of employee relations management. Although much 
more will be known tomorrow than is known today about the social con- 
ditions associated with high job satisfaction and high productivity, future 
administrators in this field will need to collect data indicating the sources 
of dissatisfaction or satisfaction. They will be engaged in continuous ex- 
perimentation with different methods of supervision, of participation in 
decision-making, and of two-way communications, to determine the effec- 
tiveness of each method in raising morale, yet at minimum cost. Their 
materials will be constantly in flux, and their efficiency as managers will 
depend on their success in continuous evaluation, experimentation, modi- 
fication of situations, and then around the circle again. 

Third, the science of consumer relations management. Much more will 
be known tomorrow than is known today about consumer motivation, buy- 
ing habits, and susceptibility to particular advertising media and themes; 
but, they will by no means obviate the necessity, in this field also, of con- 
tinuous collection and evaluation of data. Consumer motivations change 
in their relative weights during the life cycle of the individual, and as 
external conditions change. Buying habits change over time, especially 
as new distribution channels are utilized. The impact of media and par- 
ticular themes changes. All these changes point up the necessity of con- 
tinuous data collection and analysis. 

Fourth, the science of public and community relations management. 
Here again, it is people who must be continuously studied, their reactions 
reported, and the implications used in decision making. 

In all these areas, behavioral research, analysis and evaluation must go 
on continuously, for organization management — like household manage- 


ment — is never done. It continually changes, evolves and transforms itself 
and the materials on which it works. 

Here we come to one of the greatest differences between the scientific 
management of the future, and management today. In the future, as today, 
data collection and analysis will indicate the wisdom of certain actions. 
The new look in the future, however, will be what happens then. The 
actions indicated by that analysis will actually be taken! 

More research alone is not, of course, the answer — either today or to- 
morrow. For progress in management science there must also be applica- 
tion of that research. For this to happen, there must be much more two- 
way communication between practitioners and researchers. This is just as 
important within organizations as between action organizations and re- 
search agencies. This communication is more easily described than done. 

I'm convinced that annual conventions and new periodicals, helpful 
though they may be, are a long way from being the complete answer. A 
number of organizations, including the Foundation with which I am asso- 
ciated, are trying to use small group techniques of communication. In these 
groups, practitioners and researchers come together for face-to-face dis- 
cussion of problems, discussion of research bearing on those problems, and 
discussion of new research needed to help solve those problems. The vari- 
ous kinds of consulting and management engineering firms represent an- 
other kind of attempt to improve communication — a kind of learning by 
doing, in many cases. The Russell Sage Foundation, for one, is experi- 
menting with another technique: the development of hybrids — men with 
competence well enough developed in both research and application so 
that they can be effective in bridging the gap between. 

In the management science of tomorrow, I predict, there will be a great 
growth of these and other techniques whereby practitioners and scientists 
will inform, stimulate and influence each other. One of the most fruitful 
functions of this new Institute, in my opinion, would be to put some of 
its intellect and energy into developing such techniques. One of the most 
important management sciences of tomorrow could well be the science 
that joins management science and management. 

The Human Relations Approach 

Let us look at these assumptions which we make about people at work 
and which underlie the many techniques we use to deal with our problems. 

* F. J. Roethlisberger, "A 'New Look' for Management," Worker Morale and Pro- 
ductivity, General Management Series No. 141 (New York: American Management, 1948), 
pp. 11-19. 


What changes in these basic assumptions have occurred in the past 25 
years? Which ones still remain unchallenged? Which ones need more criti- 
cal scrutiny and more research? In this way we can evaluate more readily 
the progress we have made. 

Concepts of Work Motivations 

It seems to me that the greatest change in the past 25 years has occurred 
in our ways of thinking about what motivates people to work. Let us take, 
for example, the widely held notion that people at work are primarily 
motivated by economic interest and that in their pursuit of economic gain 
they are essentially logical. Wherever and whenever this assumption has 
been seriously investigated in the light of the facts, its universal validity 
has been shown to be questionable. Investigator after investigator has, 
agreed on this point. Far from being the prime and sole mover of human 
, activity in business, economic interest has run far behind in the list of 
incentives that make man willing to work. 

Yet this assumption lingers in many quarters. In the world today at the 
level of institutionalized behavior, one can hardly question it. Without 
such an assumption the modern scene remains inexplicable to many peo- 
ple. The behavior of some union leaders, as well as that of some manage- 
ment leaders, helps to perpetuate this notion. Yet a close scrutiny of the 
situation at the social level reveals the symptomatic character of the so- 
called acquisitiveness of modern man. It was a union leader who suggested 
that people join unions as much because of feelings of frustration and the 
desire for sociability as the desire for economic gain. 1 Mayo in 1933 sug- 
gested that the problem was not so much "the sickness of an acquisitive 
society" as the "acquisitiveness of a sick society." 2 People at work who are 
"activated primarily by motives of self-interest logically elaborated" are 
few in number, says Mayo. "They have relapsed upon self-interest (only) 
when social associations have failed them." 3 

Although it would be incorrect to say that this oversimplified version of 
the economic motivation of people at work has been completely discarded, 
nevertheless another theory has sprung up in the past 25 years with which 
it at least has had to compete. According to this view, people at work, 
executives as well as workers, are not too different from people in many 
other walks of life. Whether they work at the top, the middle, or the bottom 
of an organization, they are not entirely creatures of logic; they, too, have 
feelings. For example, they like to be praised rather than blamed. They do 
not like to have to admit their mistakes — at least not publicly. They like 
to feel important and to have their work recognized as important. They 

1 Clinton S. Golden and Harold J. Ruttenberg, The Dynamics of Industrial Demo- 
cracy, (New York: Harper & Bro., 1942). 

2 Elton Mayo, The Human Problems of an Industrial Civilization, Division of Re- 
search, Graduate School of Business Administration (Cambridge: Harvard University, 

3 Elton Mayo, The Social Problems of an Industrial Civilization, Division of Research, 
Graduate School of Business Administration (Cambridge: Harvard University, 1945). 


like to feel secure and independent in their relations with their superiors. 
Moreover, they like to express their feelings. They like to be listened to 
and have their feelings and points of view taken into account. They like 
to be consulted about and to participate in the making of any changes 
which will affect them personally. In short, they, too, like to belong, to be 
an integral part of some group. 

According to this version man at work is a social creature as well as an 
"economic man." He has personal and social as well as economic needs. 
Work provides him with a way of life as well as a means of livelihood. To 
understand his satisfactions and dissatisfactions at work, one must under- 
stand the social as well as the physical and economic setting in which his 
work takes place. One must understand the kinds of relationships he has 
developed or can develop with his bosses, his subordinates, and his co- 
workers, as well as with other people and groups in the organization. 

One must understand, too, what opportunity, if any, exists for social 
development in these relationships. Can spontaneity, cooperation, growth, 
and learning take place in these relationships, or are they so rigid and re- 
strictive as to prevent such developments? 

The Nature of Organization 

As this version of the worker, supervisor or executive as a social being 
began to gain acceptance, it threw doubt upon many other assumptions 
closely related to the assumption of the economic motivation of man. These 
related assumptions concerned the nature of business organization and the 
functions of the executive in securing the cooperation of people. If people 
at work are considered isolated individuals who can only be induced to 
cooperate by logical self-interest, it may also be assumed that: 

1. The only relationships existing among people in an organization are those 
that are defined by organization charts or manuals. 

2. Organization itself is a matter of verbal and logical definition — a fixed and 
static product of executive fiat or creation, and 

3. People at the lower levels of the organization remain "unorganized" until 
they become members of a union. 

4. Under this conception informal organization cannot exist, or if it does, is 

5. Teamwork becomes a mystery or miracle, and 

6. Cooperation is viewed essentially as something which can be secured by legal, 
verbal, logical, or technical means. Moreover, closely related to this concep- 

7. The exclusive function of business is to make a profit, or at least 

8. The exclusive function of business is to produce and distribute goods and 
services of good quality at the lowest cost, and 

9. If business is so conducted, the human problems will more or less take care 
of themselves. 

This family of related assumptions becomes open to question if people at 
work are to be considered social creatures who like to complicate their re- 


lationships with their fellow men — who like to belong and to be part of 
some group. 

How does this desire for human association manifest itself? If this way 
of thinking represents more accurately the motivation of people at work 
than the conception of "economic man," then it should be evidenced in 
some tangible form or other. These facts are not too hard to find. They 
have been observed since time immemorial, but only as they are observed 
under this new guiding hypothesis is their significance seen. 

It is obvious, for example, that workers, supervisors and executives are 
related to each other in different ways, many of which are not represented 
in the organization chart or manual. Not only are they organized in terms 
of the technical requirements of the job, its duties and responsibilities, but 
they are also organized in terms of sentiments, social customs, codes of be- 
havior, status, friendships, and cliques. In their daily associations, people 
at work tend to develop routine patterns of relationships and social codes 
of behavior. They come to accept these patterns of behavior and to react 
in accordance with these patterns. Within this system of relationships each 
task performed has a rank in an established prestige scale. Each work group 
becomes a carrier of social value. Each job has its own social values and its 
rank in the social scale. Each worker has a social as well as a physical place 
in the organization. 

It is obvious that this kind of organization, far from being a creation of 
the executive, is part of the given situation to which he must adjust and 
which he can ignore only at his peril. It is not a product of logic, of verbal 
legislation, or of verbal definition. It is a growing, living, evolving reality, 
the product of the give-and-take of continuous human association and in- 
teraction. It is not a logical system but a social system made up of many 
interdependent values. 

Importance of the Social Structure 

This discovery that business organization has a social as well as a logical 
structure throws considerable light upon the satisfactions and dissatisfac- 
tions of people at work. It also throws light upon the necessary precon- 
ditions for cooperation. Take, for example, the informal groupings of 
people which tend to develop around work routines. Far from being un- 
desirable and a hindrance to greater effectiveness, these informal groups 
provide the setting which makes men willing to cooperate. They exist 
wherever coordinated activities exist. Informal groups cannot be pre- 
vented, because they are the product of man's inherent desire for con- 
tinuous intimate association. They give people a place, a feeling of "be- 
longing," and a sense of importance. They make people feel that they 
command respect, have the power of independent choice, and are not just 
cogs in a machine. 

The importance of these informal groups to people at work can best be 
seen in their reactions to the introduction of change — when new methods 


or standards are initiated, newcomers are added, or someone is transferred, 
upgraded or promoted. Any supervisor knows the time it takes for such 
groups to accommodate to such changes. Any change which can be re- 
garded as an interference to their customary routines and personal inter- 
relations is viewed with alarm and suspicion. 

Although these informal groups appear at all levels in the organization, 
the character of those groups at the bottom of the organization is peculiarly 
significant, because at this level more than at any other the ways of life 
of these groups are constantly in jeopardy from change — technological 
change, the introduction of new methods, the raising of standards and the 
like. As a result, these groups in industry take on a highly defensive and 
protective character. Their major function can become the resistance to 
change and innovation, and their codes and practices develop at variance 
with the economic purpose of the enterprise. These defensive and protec- 
tive characteristics of many informal groups at the work level exist full- 
blown in many factories even before any formal union appears. 

These and many other similar observations demonstrate that there are 
determinants of cooperation just as brute and stubborn as there are brute 
and stubborn determinants of technical efficiency. Far from being a mat- 
ter of logical anad technical contrivance, cooperation is much more a 
product of relationships involving feeling and sentiment. Far from being 
something which can be willed into being by legislation, verbal persuasion, 
and efforts of personality, cooperation can only take place within the 
framework of established and accepted social structures. It is not something 
which springs up overnight, something which is here today and gone to- 
morrow, or something which can be introduced into a group from without. 

Cooperation is dependent upon routine relationships developed and 
practiced over a long period of time. It is dependent upon codes of be- 
havior whereby people work together in a group without conscious choice 
as to whether they will or will not cooperate. It is dependent upon a cer- 
tain stability in the ways of life of groups. In modern industry this stability 
is often in jeopardy because the factors determining technical efficiency are 
not necessarily coincident with the factors determining cooperation.^ This 
does not mean that these two realms are necessarily opposed, but it does 
mean that if we look at the way modern industry is organized and at the 
kind of behavior fostered by modern technology, we do not find that these 
patterns of behavior in and of themselves make for cooperation. 

The Gulf between Efficiency and Cooperation 

Modern industry is no longer turning out customary products in cus- 
tomary markets. It is committed to the turning out of new and different 
products in more efficient ways, at lower cost for more quality-and-price- 
conscious consumers. To this end science and technology have committed 
themselves, with the result that the environment of the modern factory is 
quite different from the old know-how shop. In the modern standard shop 


are a large number of people whose function is to originate better ways, 
more efficient and less costly ways of doing things, and to devise standards 
and controls to see that these goals are secured. The far-reaching repercus- 
sions of their activities on the social organization of industrial concerns is 
serious. Introduced without awareness of their effects upon the informal 
social organization, these activities can easily (1) dislocate people, (2) inter- 
fere with their established ways, (3) break up work groups, (4) prevent the 
development and practice of routine relationships, and (5) produce feel- 
ings of anxiety, insecurity, and frustration, often referred to as the feeling 
of being "pushed around." 

In short, the logical organization of efficient operation can work against 
the social organization of teamwork. Many of the changes modern tech- 
nology originates can collide head-on with the social organization of the 
enterprise and with its attempts to maintain internal stability — a necessary 
precondition for cooperative behavior. In applying modern technology, 
those with the very best of intentions can unwittingly foster the segmenta- 
tion of the social structure of industry into groups with radically different 
points of view. Thus they may unwittingly assist in the development of 
rigid relationships between segments of the structure that make coopera- 
tion difficult, if not in some cases impossible. 

From this point of view and these observations there is little evidence 
in the modern world that matters of cooperation can be left to chance so 
long as we turn out efficiently goods of good quality and low cost. A busi- 
ness organization is not only an enterprise directed to the production and 
distribution of goods; it is also a social system in which each individual 
performs certain activities involving certain duties, responsibilities and 
privileges that give him a certain social place and function in it. In admin- 
istering such a system the executive not only has to secure the economic 
purpose of the enterprise — he also has to secure the cooperation of people 
to this economic purpose. He has to maintain the internal stability of his 
social organization as well as to secure the organizational purpose. The 
fulfillment of this condition of internal stability is dependent upon facts 
which are just as real, brute, and stubborn as those facts which must be 
faced in order to fulfill the conditions of technical efficiency. In the long 
run, for any business organization to survive, both conditions must be met. 

Problems of Communication 

So far I have tried to show that in the past 25 years, with the change in 
our concept of what motivates people to work, we also began to change 
our concept of organization. As we discarded the notion of "£az&&mic~ 
man/' we begin to question the concept of business organization as merely 
a logical organization of operations for the efficient production of goods. 
We saw that a balanced relationship between both the logical organization 
of operations and the social organization of teamwork is always necessary. 
It is the function of the executive to achieve this balanced relationship. 


Again, it would be absurd to claim that the older assumptions have been 
completely abandoned. Far from it — they still flourish full blown in many 
places. Nevertheless they do not persist completely unchallenged. 

I should like to turn now to certain assumptions in the area of com- 
munication about which I am not so certain. Many people, when discussing 
matters of motivation, organization, and communication, assume they are 
talking about three separate subjects quite independent of each other. To 
me these words merely refer to three interdependent aspects of any or- 
ganized human activity and if this is so it would be natural to expect that 
a change in conception in any one of these three areas would affect the 
other two. Yet few people recognize this. It has always been a source of 
astonishment to me to find that many people who give ready verbal ac- 
ceptance to the propositions I have asserted about the nature of organiza- 
tions and the motives of people at work have great difficulty in applying 
their new insights or in inducing other people to apply them. They seem 
to use their new concepts only for purposes of learned talk. When they try 
to apply them they immediately revect to a most primitive set of assump- 
tions about securing the understanding of people. 

For this reason I have come to believe that if the revolution of our ideas 
in the total area of human relationships is to be complete, we certainly 
need to question and revise some of our assumptions about human com- 
munication. I will discuss briefly some of these assumptions that need more 
attention and research in the next 25 years. 

1. People get things done primarily by the authority of their position and the 
clarity of their communication. 

2. People hear what they are told if what they are told is logical and clear. 

3. People emotionally accept what they understand as logical. 

4. If only the people at the bottom of the organization understood the economic 
problems of the business, they would behave differently. 

5. Subordinates can talk freely to their supervisors. 

6. Superiors are emotionally capable of listening objectively to their subordi- 

7. Communication is a kind of specific and special activity separate from ordi- 
nary behavior and matters of daily intercourse. It is something which the 
executive can delegate to specialists in communication, such as public-rela- 
tions and employee-relations experts. 

I could go on with this list but these seven points are enough to warrant 

Authority a Product of Relationships 

It can easily be seen that neither having the position of authority nor 
being logical and clear will insure getting things done in an organization. 
Most of us know people who, with all the formal authority in the world 
and with an unusual capacity to express themselves logically, have great 
difficulty in getting cooperation. Chester Barnard points out how so often 


"what in theory is authoritative, in practice lacks authority." 4 He notes 
how some people in positions of responsibility lose what little authority 
they have by issuing orders they know cannot or will not be obeyed. 

The fact that so little can be accomplished by authority would not be 
surprising if we accepted and understood better our new insights regarding 
the nature of organization and the motivation of people. In the organic 
system of relationships that constitute organization, authority does not re- 
side in the superior individual; it resides in the kind of relationship exist- 
ing between superior and subordinate. Without the cooperative attitudes 
of subordinates the voice of authority can speak, but the big booming 
noises it makes do not register upon people who refuse to accept it as 

The "Priceless Ingredient" in Communication 

In connection with the assumption that people hear what they are told 
if it is logical and clear, I think of the young married woman, whom I shall 
call Mary, who was hired on a temporary basis by an office manager for a 
temporary job and because it was against the policy to hire married women 
for permanent employment. When Mary was hired she was told about this 
policy, and six months later when she was told that her services were no 
longer required, she was again reminded that the company policy pro- 
hibited the permanent employment of married women. Because her work 
had been of good quality, the office manager gave her two weeks' advance 
notice and two weeks' advance pay. Instead of being appreciative, how- 
ever, Mary began to accuse the office manager and the company of giving 
her a "raw deal." She told her story to many people — how she had been 
allowed to stay on for six months, how during this period another person 
had been hired who should have been the one to go, and so on. The as- 
sistant manager, the office manager, and the credit manager all reasoned 
unsuccessfully with Mary, emphasizing over and over again the company 
policy regarding married women. But she would have none of it. Before 
she left she succeeded in raising such a rumpus that she finally got the 
attention of the president of the company. 

The poor office manager was bewildered and hurt at Mary's unreason- 
able response. Although we can all sympathize with his good intentions 
the interesting point in this situation is that what Mary was told and what 
Mary heard were two quite different things. People are inclined to hear 
things in terms of their feelings and their personal situations. Mary was 
the sole support of an unemployed husband and a child — a fact which the 
office manager, when hiring Mary, did not fincl out. Temporary work, 
therefore, was no solution to Mary's personal problem. If the office man- 
ager had talked to her about that before hiring her, or at least during the 
period of her employment, she might have heard what he said. But he was 

4 Chester I. Barnard, The Functions of the Executive (Cambridge: Harvard Univer- 
sity Press, 1938). 


trying to get her to understand the policy of the company. In this process 
he was crystal clear, but in terms of Mary's personal situation and in view 
of her feeling of permanent status after six months' employment, it was 
certainly the last thing she was capable of hearing. 

Logic Alone Is Not Enough 

This instance may be trivial, but it illustrates, among other things, the 
futility of trying to explain things to people solely in terms of the speaker's 
point of view, without taking into account the point of view of the person 
to whom the explanation is being given. This approach assumes that peo- 
ple emotionally accept what they logically understand. It refuses to accept 
the inevitability of non-logical behavior — that people are motivated more 
by matters of feeling and sentiment than by matters of fact and logic. No 
amount of logical explanation from management's point of view will be 
emotionally accepted by people if it fails to take into account their per- 
sonal situations and feelings. It only provokes argument and irritation 
and causes workers to feel that they are misunderstood. 

An extraordinary blindness to this matter of securing the understanding 
of people is well manifested by what I shall refer to as the "tell-'em, sell-'em, 
explain-it-to-'em" school of thought. Whenever situations arise where peo- 
ple are reluctant to follow or accept cheerfully certain management orders, 
policies, changes, goals, aims, or what not, this school of thought immedi- 
ately assumes that such a state of affairs exists only because the people 
involved do not logically understand the need for the order or change. 

This school of thought assumes that a clear order is automatically 
obeyed; that the logical and lucid exposition of an aim is sufficient for 
people to accept it; that any change is cheerfully accepted when the need 
for it is understood as logical. As a result, all problems requiring people's 
understanding are resolved by the "tell-'em, sell-'em, explain-it-to-'em" 
technique. Employees are told most solemnly how their rates of pay have 
been determined, how and why this is the best method to do their work, 
why this is the best company to work for, etc. 

Whenever this method fails and people still don't understand, this school 
of thought, being unable to question its assumption about matters of hu- 
man understanding, is forced into one of two conclusions: Either, "these 
clucks are just too damn dumb to understand," or the explanations have 
not been clear enough. When the latter is considered to be the case they 
feverishly draw more charts and diagrams, prepare more manuals and 
bulletins, and hire more experts in communication to explain policy in 
words of one syllable, so that even a moron could understand manage- 
ment's good intentions and purposes. 

Is a Common Viewpoint Possible? 

This approach, it seems to me, is reaching serious proportions in business 
and industry today. Perhaps I am generalizing from too limited experi- 


ence, but as I view the industrial scene I receive the impression of a frenzied 
attempt on the part of management people to secure the employees' under- 
standing of management's point of view. This almost pathological need of 
management to be understood and to be loved by its employees is in itself 
an interesting phenomenon which needs exploration. But the point I want 
to explore here is a different one. 

If the social structure of industry is segmented into groups with different 
points of view, how is cooperation toward a common purpose, so essential 
to operation of the system, possible? By trying to get all the groups to feel 
alike and share the same point of view. But this is not in the cards. It runs 
contrary to all we know about matters of social organization. Of course, if 
each person and group could be made to realize the effect of his behavior 
on other persons and groups in the organization, it would be an ideal 
situation. But this is difficult because it involves a willingness on the part 
of all involved to recognize and appreciate points of view different from 
their own. Just how do you tell or persuade people about this? Who is to do 
the telling and persuading? And from whose point of view is the telling 
and persuasion to be done? 

Too often each segment of the organization tries to sell or explain its 
point of view to other segments of the organization. Each group tries to 
get other groups to understand and to cooperate with its own point of view. 
When management people enter into this game, in my opinion the jig is 
up. They have thereby surrendered the last vestige of their leadership. 

If our conception of an organization as a living, growing, evolving social 
system is correct; if organization is not a static, fixed blueprint of manage- 
ment, then it follows that the function of the executive is to administer 
this total social system with its many different points of view and values. It 
cannot be his function to represent the values of only one segment of the 
structure. If the whole system is to grow and develop, it must involve not 
only a willingness on the part of the executive to accept and appreciate 
points of view different from his own, but also a skill in practicing this 
orientation. In everyday supervisory and executive action this principle is 
well understood: It is the practice of — and not discussion of — this orienta- 
tion that gets results. 


It is obvious that human relations is very much the fashion in business 
thinking today. And fashions in business thinking are not a novelty; there 

* Malcolm P. McNair, "Thinking Ahead: What Price Human Relations," Harvard 
Business Review, Vol. XXXV, No. 2 (March-April, 1957), pp.m 15-22. 


have been many others. I can well recall that when I first joined the Har- 
vard Business School faculty, the reigning vogue in business thinking was 
scientific management. Only a few years later, however, the grandiose 
claims of scientific management were sharply debunked. What was of solid 
worth remained — but a considerable amount of froth had been blown off 
the top. 

Must we go through the same process — with all its waste and possible 
damage along the way — to get to what is worthwhile in human relations? 


My quarrel is not with the solid substance of much that is comprehended 
by the phrase "human relations," but rather with the "cult" or "fad" 
aspects of human relations, which are assuming so much prominence. 

There can be no doubt that people are of absorbing interest to other 
people. To verify this fact you have only to look at what makes headlines 
in the newspapers. There is a fascination for most of us in speculating 
about people and their behavior. So it is not surprising that human rela- 
tions has assumed so much prominence as a fashionable mode of thinking. 
But, as with any kind of fashion, it can be carried to the point where people 
accept it without questioning — and certainly this can be dangerous when 
we are dealing with such an important segment of man's activity. 

Therefore, just because the tide has gone so far, I must make my points 
in the most emphatic manner possible. Though I feel I have not distorted 
the picture, I do not care whether businessmen accept my interpretation 
in full, or even in large part, so long as they get stirred up to do some criti- 
cal thinking of their own. 

Before going any further let me try to indicate the things in this area of 
human relations which are really basic and with which there is no con- 
ceivable quarrel. In the first place, there can be no dispute with research 
in the social sciences, including the behavioral sciences. Obviously such 
research is highly important to business management and to business edu- 
cation. Business management and education must seek to understand the 
behavior of people as workers, the behavior of people as members of organ- 
izations, and, of course, the behavior of people as consumers. In all these 
areas we need more and better understanding of human behavior. 

Neither is there any dispute in regard to the things that are important 
for a man's conduct in relation to his fellow men. The foundation is good 
Christian ethics, respect for the dignity of the individual human being, 
and integrity of character. On these we should stand fast. Personally I have 
always liked this paraphrase of what Theodore Roosevelt once said in a 
commencement address: "On the Ten Commandments and the Sermon on 
the Mount, uncompromising rigidity; on all else, the widest tolerance." 1 

l "Introduction," Theodore Roosevelt's America, Farida Wiley (ed.) (New York: Devin- 
Adair Co., 1955), p. xxi. 


But between acceptance of high moral principles and the exigencies of day- 
to-day conduct of affairs there can be, with the best intentions, a very wide 
gap. This is the gap which by better understanding of human motivation 
we should try to fill. 

Also there can be little dispute about the observations on the behavior 
of people at work which Professor Fritz J. Roethlisberger, the leader of the 
human relations group at Harvard, summed up half a dozen years ago: 

People at work are not so different from people in other aspects of life. They 
are not entirely creatures of logic. They have feelings. They like to feel important 
and to have their work recognized as important. Although they are interested in 
the size of their pay envelopes, this is not a matter of their first concern. Some- 
times they are more interested in having their pay reflect accurately the relative 
social importance to them of the different jobs they do. Sometimes even still more 
important to them than maintenance of socially accepted wage differentials is the 
way their superiors treat them. 

They like to work in an atmosphere of approval. They like to be praised rather 
than blamed. They do not like to have to admit their mistakes — at least, not pub- 
licly. They like to know what is expected of them and where they stand in relation 
to their boss's expectations. They like to have some warning of the changes that 
may affect them. 

They like to feel independent in their relations to their supervisors. They like 
to be able to express their feelings to them without being misunderstood. They 
like to be listened to and have their feelings and points of view taken into account. 
They like to be consulted about and participate in the actions that will personally 
affect them. In short, employees, like most people, want to be treated as belonging 
to and being an integral part of some group. 2 

In other words, "People behave like people." They have feelings. They 
don't always behave logically. The concept of the economic man can be a 
dangerous abstraction. Every individual wants to feel important, to have 
self-esteem, to have "face." Everybody likes to feel that he is "wanted." He 
likes to have a "sense of belonging." Group influences and group loyalties 
are important. The desire for psychological "security" is strong. People 
don't always reveal their feelings in words. 

That all these human attitudes have important consequences for man- 
agement is likewise not open to dispute. It is well accepted in management 
thinking today that leadership has to be earned, it cannot be conferred; 
that authority comes from below, not from above; that in any business unit 
there will be "social" groups which will cut across organization lines; that 
good communication involves both the willingness to listen and the ability 
to "get through" but not by shouting. 

Dean Stanley F. Teele of the Harvard Business School recently made 
the statement, "As we have learned more and more about a business organ- 
ization as a social unit, we have become increasingly certain that the ex- 
ecutive's skill with people — or the lack of it — is the determining element 

2 From a speech entitled "The Human Equation in Employee Productivity" before 
the Personnel Group of the National Retail Dry Goods Association, 1950. 


in his long-range success or failure." 3 Here we are down to the nub of the 
matter. What is this skill? Can it be taught? Are there dangers in the teach- 
ing of it? Is skill an appropriate concept? 

Perhaps I can give a clue to the line of thought which I am developing 
when I say that I am essentially disturbed at the combination of skill with 
human relations. For me, "human relations skill" has a cold-blooded con- 
notation of proficiency, technical expertness, calculated effect. 

There is no gainsaying the fact that a need long existed in many busi- 
nesses for a much greater awareness of human relations and that, in some, 
perhaps in a considerable number, the need still exists. The very avidity 
with which people prone to fashionable thinking in business have seized 
on the fad of human relations itself suggests the presence of a considerable 
guilt complex in the minds of businessmen in regard to their dealings with 
people. So it is not my intent to argue that there is no need for spread- 
ing greater awareness of the human relations point of view among many 
businessmen. Nevertheless it is my opinion that some very real dangers 

The world's work has to be done, and people have to take responsibility 
for their own work and their own lives. Too much emphasis on human 
relations encourages people to feel sorry for themselves, makes it easier 
for them to slough off responsibility, to find excuses for failure, to act like 
children. When somebody falls down on a job, or does not behave in ac- 
cordance with accepted codes, we look into his psychological background 
for factors that may be used as excuses. In these respects the cult of human 
relations is but part and parcel of the sloppy sentimentalism characterizing 
the world today. 

Undue preoccupation with human relations saps individual responsi- 
bility, leads us not to think about the job any more and about getting it 
done but only about people and their relations. I contend that discipline 
has its uses in any organization for accomplishing tasks. And this is espe- 
cially true of self-discipline. Will power, self-control, and personal respon- 
sibility are more than ever important in a world that is in danger of wallow- 
ing in self-pity and infantilism. 

Most great advances are made by individuals. Devoting too much effort 
in business to trying to keep everybody happy results in conformity, in 
failure to build individuals. It has become the fashion to decry friction, but 
friction has its uses; without friction there are no sparks, without friction 
it is possible to go too far in the direction of sweetness and light, harmony, 
and the avoidance of all irritation. The present-day emphasis on "bringing 
everybody along" can easily lead to a deadly level of mediocrity. 

3 From a speech entitled "The Harvard Business School and the Search for Ultimate 
Values" at the presentation to the Harvard Business Review of a citation from The 
Laymen's Movement for a Christian World, New York, October 25, 1955. 


We can accept the first part of a statement by Peter Drucker: "The suc- 
cess and ultimately the survival of every business, large or small, depends 
in the last analysis on its ability to develop people. . . . This ability ... is 
not measured by any of our conventional yardsticks of economic success; 
yet it is the final measurement." Drucker, however, goes on to add a further 
thought, which opens more opportunity for debate. He says, "Increasingly 
from here on this ability to develop people will have to be systematized 
by management as a major conscious activity and responsibility." In this 
concept there is the familiar danger of turning over to a program or a 
course or an educational director a responsibility that is a peculiarly per- 
sonal one. 

The responsibility for developing people belongs to every executive as 
an individual. No man is a good executive who is not a good teacher; and 
if Drucker's recommendation that executive development be "systematized 
by management as a major conscious activity" is interpreted as meaning 
that someone trained in the new mode of thinking should be appointed as 
director of executive development, then the probable outcome will be 
simply another company program in human relations. While this may be 
good for some of the executives, no long-run contribution to the develop- 
ment of good people will be made unless the good individuals personally 
take the responsibility for developing other individuals. 

Please do not misunderstand me. I am not talking about old-fashioned 
rugged individualism or the law of the jungle, and I am not holding up as 
ideals the robber barons of the nineteenth century, or even some of the 
vigorous industrialists of the early twentieth century. But I ask you to 
consider whether some of today's business leaders, well known to all of us — 
Clarence Randall, Gardiner Symonds, Neil McElroy, Tex Colbert, Earl 
Puckett, Fred Lazarus, and so on — are not primarily products of a school 
of friction and competitive striving. We need more men like them, not 
fewer. It may be appropriate here to cite the recent observations of Dean 
Teele on "inner serenity" and "divine discontent": 

Any realistic approach to the nature of top business management, and therefore 
to the problems of selection and development for top business management, makes 
abundantly clear that the balance between these two [attributes] is perhaps the 
most important determinant of success in top business management. Let me elabo- 

Psychiatrists, psychologists, and religious advisers join with ordinary lay ob- 
servers in noting how often human efficiency is greatly reduced by sharp inner 
conflicts — conflicts which usually center around value judgments. That is to say, 
conflicts as to basic personal purposes and objectives, as to the values to be sought 
in life, are far more often the barriers to effective performance than intellectual 
incapacity or lack of necessary knowledge. The goal then from this point of view 
is the development of that inner serenity which comes from having struggled with 
and then resolved the basic questions of purpose and values. 

On the other hand, in business as in the world generally, discontent is an ele- 
ment of the greatest importance. Dissatisfaction with oneself, with one's perform- 
ance, is an essential for improvement. So important to the progress of the world 


is discontent on the part of the relatively few who feel it, that we have come to 
characterize it as divine discontent. Here . . . the need is for both inner serenity 
and divine discontent — a need for both in a balance between the two appropriate 
for the particular individuals. 4 

To keep that important balance of inner serenity and divine discontent 
in our future business leaders, we need to focus educational and training 
programs more sharply on the development of individuals than is the 
fashion today. What is important for the development of the individual? 
Obviously, many things; but one prime essential is the ability to think, 
and the nurturing of this ability must be a principal objective of all our 
educational effort. 

In the field of business education this ability to think, to deal with situ- 
ations, to go to the heart of things, to formulate problems and issues, is not 
an innate quality. It has to be cultivated, and it requires long and rigorous 
and often tedious practice in digging out significant facts, in weighing 
evidence, foreseeing contingencies, developing alternatives, finding the 
right questions to ask. In all business education, whether at the college or 
graduate level or at the stage of so-called executive development, we must 
not omit the insistence on close analysis, on careful reasoning and deduc- 
tion, on cultivation of the power to differentiate and discriminate. 

There is a very real danger that undue preoccupation with human rela- 
tions can easily gi\e a wrong slant to the whole process of education for 
business leadership. For one thing, it tends to give a false concept of the 
executive job. Dealing with people is eminently important in the day's 
work of the business executive, but so are the processes of analysis, judg- 
ment, and decision making. It takes skill and persistence to dig out facts; 
it takes judgment and understanding to get at the real issues; it takes per- 
spective and imagination to see the feasible alternatives; it takes logic and 
intuition to arrive at conclusions; it takes the habit of decision and a sense 
of timing to develop a plan of action. 

On the letterhead of the general policy letters that are sent periodically 
to the managing directors of all 80-odd stores in the Allied Stores Corpora- 
tion there is this slogan: 

To LOOK is one thing. 

To SEE what you look at is another. 

To UNDERSTAND what you see is a third. 

To LEARN from what you understand is still something else. 

But to ACT on what you learn is all that really matters, isn't it? 

An executive's ability to see, to understand, to learn, and to act comprises 
much more than skill in human relations. 

Awareness of human relations as one aspect of the executive's job is of 
course essential. But, in my view, awareness of human relations and the 

4 "The Fourth Dimension in Management," an address to the American Management 
Association, New York, May 25, 1956. 


conscious effort to practice human relations on other people are two differ- 
ent things, and I think this is crucial. 

As soon as a man consciously undertakes to practice human relations, 
one of several bad consequences is almost inevitable. Consciously trying to 
practice human relations is like consciously trying to be a gentleman. If 
you have to think about it, insincerity creeps in and personal integrity 
moves out. With some this leads by a short step to the somewhat cynical 
point of view which students in Administrative Practices courses have de- 
scribed by coining the verb "ad prac," meaning "to manipulate people for 
one's own ends." 

A less deliberate but perhaps even more dangerous consequence may be 
the development of a yen for managing other people's lives, always, of 
course, with the most excellent intentions. In the same direction the con- 
scious practice of human relations leads to amateur psychiatry and to the 
unwarranted invasions of the privacy of individuals. 

Hence I am disturbed about the consequences to business management 
of human relations blown up into pseudoscience — with a special vocabu- 
lary and with special practitioners and experts. In fact, to my mind there 
is something almost sinister about the very term "human relations prac- 
titioner," though I am sure that all sincere devotees of human relations 
would vigorously disclaim any such imputation. 

For me much of the freshness and the insight which characterized a great 
deal of the earlier work in this field — exemplified by the quotation from 
Professor Roethlisberger which I cited in my introductory statement — has 
been lost as the effort has progressed to blow human relations up into a 
science — something to be explored and practiced for its own sake. 

I realize that many people in the human relations field — Professor Roe- 
thlisberger in particular — are also disturbed about this trend, and about 
its unintended repercussions. But it was almost inevitable that other peo- 
ple would run away with such a fruitful concept, and set it up as an idol 
with appropriate rituals of worship (usually called "techniques"). Once 
you throw yourself into trying to "listen," to "gain intuitive familiarity," 
to "think in terms of mutually independent relationship," and so on, you 
can easily forget that there is more to business — and life — than running 
around plying human relations "skill" to plumb the hidden thoughts of 
everybody with whom you come in contact, including yourself. 

This is the same mistake that some consumer motivation researchers 
make, as Alfred Politz has pointed out — trying to find out the atti- 
tudes, opinions, and preferences in the consumer's mind without regard 
to whether these factors are what determine how he will act in a given 
buying situation. 5 In his words, the "truth" that such researchers seek — 

5 "Science and Truth in Marketing Research," Harvard Business Review, January- 
February, 1957, p. 117. 


and he always puts the word in quotes — is not only of a lower order than 
the scientifically established facts of how consumers react in real life, but 
it is also of less use to managers in making marketing decisions. 

The whole thing gets a little ridiculous when, as pointed out in another 
article in this issue, foremen are assumed to have progressed when they 
have gained in "consideration" at the expense of something called "in- 
itiating structure" — yet such was the apparent objective of one company's 
training program. 6 

From the standpoint of developing really good human relations in a 
business context, to say nothing of the job of getting the world's work done, 
the kind of training just described seems to me in grave danger of bogging 
down in semantics and trivialities and dubious introspection. I am totally 
unable to associate the conscious practice of human relations skill (in the 
sense of making people happy in spite of themselves or getting them to do 
something they don't think they want to do) with the dignity of an in- 
dividual person created in God's image. 

Apparently this "skill" of the "human relations practitioner" consists to 
a considerable degree of what is called "listening." The basic importance 
of the ability to listen is not to be gainsaid; neither is it to be denied that 
people do not always reveal their inward feelings in words. But in the effort 
to blow human relations up into a science and develop a technique of com- 
munication, some of the enthusiasts have worked up such standard con- 
versational gambits as "This is what I think I hear you saying," or "As I 
listen, this is what I think you mean." 

No doubt there are times when a silent reaction of this kind is appro- 
priate, but if the human relations practitioner makes such phrases part of 
his conversational repertoire, there are times when these cute remarks may 
gain him a punch in the nose. Sometimes people damn well mean what 
they are saying and will rightly regard anything less than a man-to-man 
recognition of that fact as derogatory to their dignity. 

That a group of foremen who were given a course emphasizing human 
relations and thereafter turned out to be distinctly poorer practitioners 
than they had been before taking the course, as in the above case, would 
not, to my mind, be simply an accident. I think it a result that might well 
be expected nine times out of ten. In other words, the overemphasis on 
human relations, with all its apparatus of courses, special vocabulary, and 
so on, tends to create the very problems that human relations deals with. 
It is a vicious circle. You encourage people to pick at the scabs of their 
psychic wounds. 

In evaluating the place of human relations in business, a recent incident 
is in point: 

At a luncheon gathering Miss Else Herzberg, the highly successful educational 
director of a large chain of stores in Great Britain, Marks and Spencer, Ltd., de- 
scribed at some length the personnel management policies of that concern and the 

6 Kenneth R. Andrews, "Is Management Training Effective? II. Measurement, Ob- 
jectives, and Policy," Harvard Business Review, (March-April 1957), p. 63. 


high state of employee morale that existed. Throughout her description I was 
listening for some reference to human relations. I did not hear it, and when she 
had finished I said, "But, Miss Herzberg, you haven't said anything about human 
relations." Immediately she flashed back, "We live it; we don't have to talk about 

In point also is a recent remark of Earl Puckett, chairman of the board 
of Allied Stores Corporation, when in discussing a particular management 
problem he said, "Of course you treat people like people." 

And so, although I concede that there is still too little awareness of hu- 
man relations problems in many business organizations, I think that the 
present vogue for human relations and for executive development pro- 
grams which strongly emphasize human relations holds some real dangers 
because it weakens the sense of responsibility, because it promotes con- 
formity, because it too greatly subordinates the development of individ- 
uals, and because it conveys a one-sided concept of the executive job. 

I turn now more specifically to the dangers to business education at the 
college level which seem to me inherent in the present overemphasis upon 
human relations. Business executives should have as much concern with 
this part of the subject as teachers — perhaps more, because they must use 
the young men we turn out; furthermore, they represent the demand of 
the market and so can have a real influence on what the educators do. 

The dangers to the education of young men, in my opinion, are even 
more serious than the dangers to business executive development programs 
for mature men. After all, we are well aware that businessmen follow fads, 
and so fairly soon the human relations cult in business will begin to wane 
and operations research or something else will become the fashion. Also, 
as remarked earlier, there is still a substantial need in business for greater 
awareness of human relations, and more businessmen are sufficiently adult 
to separate the wheat from the chaff. Thus in advanced management train- 
ing programs for experienced executives there is no doubt greater justi- 
fication for courses in Human Relations than there is in collegiate and 
immediate graduate programs. 

From the general educational standpoint perhaps the first question is 
whether human relations can be taught at all. I do not deny that something 
can be learned about human relations, but I do maintain that direct em- 
phasis on human relations as subject matter defeats the purpose. When 
things must come from the heart, the Emily Post approach won't do; and 
if behavior does not come from the heart, it is phony. Clarence Budington 
Kelland, that popular writer of light fiction, in a recent Saturday Evening 
Post serial entitled "Counterfeit Cavalier," makes one of his characters 

A very nice person has to start by being nice inside and have an aptitude for 
it. . . . They don't have to learn. It comes natural. No trimmings, but spontaneous. 
... If you have to think about it, it is no good. 7 

7 May 26, 1956, p. 24. 


Good human relations do not lend themselves to anatomical dissection 
with a scalpel. How do people normally acquire good human relations? 
Some of course never do. In the case of those who do enjoy success in 
human relations and at the same time retain their sincerity, the result, I 
am convinced, is a composite product of breeding, home, church, educa- 
tion, and experience generally, not of formal Human Relations courses. 

Hence in my view it is a mistake in formal education to seek to do more 
than develop an awareness of human relations, preferably as an integral 
part of other problems. This does not mean, of course, that the results of 
research in human behavior should not be utilized in the teaching of busi- 
ness administration. Certainly such results should be utilized (with due 
circumspection to avoid going overboard on theories that are still mostly 
in the realm of speculation). To take account of human relations in mar- 
keting problems and in personnel management problems and in labor rela- 
tions problems and industrial management problems, and so on, of course 
makes sense. What I am decrying is the effort to teach human relations as 
such. Thus, I applaud the training of personnel managers, but I am ex- 
ceedingly skeptical of training human relations practitioners. 

I should like also to venture the personal opinion that human relations 
in its fairly heavy dependence on Freudian psychology is headed the wrong 
way. In the long history of mankind, the few centuries, dating perhaps 
from the Sumerian civilization, during which we have sought to apply an 
intellectual and moral veneer to man the animal are a very short period 
indeed as compared with the time that has elapsed since our ancestors first 
began to walk erect; and it seems to me that a large part of the job of 
education still must be to toughen and thicken this veneer, not to encour- 
age people to crack it and peel it off, as seems to have been the fashion for 
much of the last half century. I suspect that modern psychiatry is in a 
vicious circle, that some of the principal causes of increased mental disease 
lie in morbid introspection, lack of strong moral convictions, and leisure 
that we have not yet learned how to use. 

I believe that one of these days a newer school of thought in these mat- 
ters will re-emphasize the importance of will power, self-control, and per- 
sonal responsibility. I can well recall hearing Charles William Eliot, on 
the occasion of his ninetieth birthday, repeat his famous prescription for 
a happy life: "Look up, and not down, look forward and not backward, 
look out and not in." 

Our present preoccupation with the emotional and nonlogical aspects 
of life seems to me in many ways responsible for the prevalent wishful 
thinking of the American people. As a higher and higher proportion of 
American youth goes to college, it might be supposed that intelligently 
realistic ways of looking at things would be on the increase, but the con- 
trary seems to be true. As people we are more prone than ever to let our 
desires color our thinking. More and more the few people who have the 
courage to present realistic viewpoints on national and world affairs find 


that the public will not listen to what it does not wish to hear. Why isn't 
education bringing us a more intelligent outlook on life? 

Can it be that one of the reasons is that education itself has surrendered 
so far to the ideas that are concerned primarily with the current fashion- 
able interest in the emotional and nonlogical aspects of living? In review- 
ing Joan Dunn's book, Why Teachers Can't Teach — A Case History, E. 
Victor Milione remarks, "Our educational system has substituted training 
in life adjustment for education." 8 Obviously there are many analogies 
between the doctrines of the progressives in education and the overem- 
phasis on human relations. Personally I prefer a more rigorous educational 
philosophy. I can well recall a remark of A. Lawrence Lowell that "the 
business of education is making people uncomfortable." 

In any event, I think it is the job of education to push for more and 
not less emphasis on logics and morals in dealing with social problems. 
The following quotation from C. C. Furnas, chancellor of the University 
of Buffalo, makes much sense to me: 

We must recognize, of course, that it takes much more than pure intellect to 
answer social questions. Great problems involving many people are usually han- 
dled in an atmosphere of high emotion and the participants often show but little 
evidence of being rational human beings. But, even though it acts slowly, it is 
certainly true that intelligence can and does have some influence in shaping mass 
emotions. It is in this slow modification of mass emotional patterns that the aver- 
age intelligent person can and should play a continuing role within his own sphere 
of influence. 9 

How can we do this if we encourage immature minds to regard the non- 
logical aspects as the most important? Not that teachers necessarily intend 
it this way — though I am sure some have been carried so far — but simply 
that putting so much explicit emphasis on the emotional and irrational 
makes the student feel it is all-important. No protestation to the contrary 
can undo that impression — that perhaps nonlogical impression — which is 
exactly what an understanding of human behavior ought to lead us to ex- 
pect in the first place. 

But perhaps my principal quarrel with the teaching of human relations 
has to do with timing. Discussion of such problems as what men should 
learn, and how they should learn it, is probably as old as education itself, 
but much less attention has been given to the question, "When should men 

The whole modern development of adult education has brought into- dis- 
repute the old adage that you can't teach an old dog new tricks. In fact, in 
the area of business administration it is quite plausible that teaching of 
certain managerial skills is best accomplished in later years, after men have 

8 The Freeman, March, 1956, p. 59. 

9 Ibid., p. 24. 


gained considerable experience in business activities. William H. Whyte, 
Jr., the author of Is Anybody Listening? and The Organization Man, in 
discussing the Alfred P. Sloan Fellowship Program at the Massachusetts 
Institute of Technology, has this to say: 

But on one point there is considerable agreement: to be valuable, such a course 
should be taken only when a man has had at least five years' business experience. 
The broad view can be a very illusory thing. Until a man has known the necessity — 
the zest — of mastering a specific skill, he may fall prey to the idea that the man- 
ager is a sort of neutralist expediter who concerns himself only with abstractions 
such as human relations and motivation. Those who study these subjects after ten 
years or so of job experience have already learned the basic importance of doing 
a piece of work; in the undergraduate business schools, however, the abstractions 
are instilled in impressionable minds before they are ready to read between the 
lines and to spot the vast amount of hot air and wishful thinking that is contained 
in the average business curriculum. 10 

Among those managerial skills the specific teaching of which had better 
be left to later years is the handling of human relations. Thus I should not 
only rewrite the old adage in the form, "There are some tricks you can 
teach only to an old dog," but I should go on to the important corollary, 
"There are some tricks that you had better not try to teach to young dogs." 
The dangers in trying to teach human relations as such at the collegiate or 
immediate graduate level are substantial. Indeed, by developing courses 
in human relations for college graduates in their early twenties without 
previous business experience we are essentially opening Pandora's box. 

Such courses lead to a false concept of the executive's job. There is a 
de-emphasis of analysis, judgment, and decision making. Someone has said 
that the job of the modern executive is to be intelligently superficial. This 
statement is true in the sense that when a man reaches an important execu- 
tive post, he does not have time to go to the bottom of every problem that 
is presented to him, and he certainly should not undertake himself to do 
the work of his subordinates. If he does these things, he is a poor executive. 
But if an executive has not learned at some stage to go to the bottom of 
problems in one or more particular areas, he will not in the long run be a 
successful manager. 

Human relations expertise is not a substitute for administrative leader- 
ship, and there is danger in getting young men to think that business 
administration consists primarily of a battery of experts in operations re- 
search, mathematics, theory of games, and so on, equipped with a Univac 
and presided over by a smart human relations man. Undoubtedly many of 
the new techniques are substantial aids to judgment, but they do not fully 
replace that vital quality. One of the great dangers in teaching human 
relations as such at the collegiate or immediate graduate level is that the 
student is led to think that he can short-cut the process of becoming an 

Fortune, June, 1956, p. 248. 


The study of human relations as such also opens up a wonderful "escape" 
for the student in many of his other courses. Let's admit it: none of us is too 
much enamored of hard thinking, and when a student in class is asked to 
present an analysis of some such problem as buying a piece of equipment, 
or making a needed part instead of buying it, he frequently is prone to 
dodge hard thinking about facts in favor of speculation on the probable 
attitudes of workers toward the introduction of a new machine or new 

For some students, as for some businessmen, the discussion of human 
relations aspects of business management problems can even lead to the 
development of the cynical "ad prac" point of view, which assumes that 
the chief end of studying human relations is to develop skill in manipulat- 
ing people; this perhaps is the present-day version of high-pressure selling. 

A different but equally dangerous result occurs in the case of the student 
who becomes so much interested in human relations that he turns himself 
into an amateur psychiatrist, appraises every problem he encounters in 
terms of human relations, and either reaches an unhealthy state of intro- 
spection or else develops a zeal for making converts to human relations arid 
winds up with a passion for running other people's lives. 

The sum of the matter is this. It is not that the human relations concept 
is wrong; it is simply that we have blown it up too big and have placed too 
much emphasis on teaching human relations as such at the collegiate and 
early graduate level. A sound program in business education, in my opin- 
ion, will of course envisage research in human behavior; it may, with some 
possible good results, venture on offering specific courses in Human Rela- 
tions for mature executives; but for students in their twenties who have 
not yet become seasoned in practical business activities we should keep 
away from specific courses in Administrative Practices and Human Rela- 
tions, while at the same time inculcating an awareness of human rela- 
tions problems wherever they appropriately appear in other management 
courses. In other words, let us look closely enough at what we are doing 
so we can be sure that the gains we make in this area turn out to be net 

Finally, to express a personal conviction on a somewhat deeper note, I 
should like to refer again to Dean Teele's comments, cited earlier, on "in- 
ner serenity." The attainment of that all-important goal, in my opinion, 
is not to be sought through the present vogue of interest in human rela- 
tions. Inner serenity is an individual matter, not a group product. As 
Cameron Hawley puts it, "A man finds happiness only by walking his own 
path across the earth." 11 

Let's treat people like people, but let's not make a big production of it. 

11 "Walk Your Own Pathl" This Week Magazine, December 11, 1955. 

The Mature and Dynamics of Objectives 

A requirement for understanding the functioning of any organization is 
a knowledge of its objectives. Although not expressed in terms of member- 
ship or participative motivation, objectives provide the formal relatedness 
of the group. A prerequisite to co-ordinated effort is an intended goal. 
Moreover, a clear concise statement of the over-all objectives is a pre- 
requisite to general or specific "means" decisions. Finally, the objectives of 
an organization define in ideal terms the character role which it attempts 
to perpetuate. 

The business firm, an economic organization, finds its justification in 
its raison d'etre, defined by the economic utility it supplies to society. In 
the light of our highly sophisticated exchange economy and according to 
the current politico-economic environment, the measures of business suc- 
cess are expressed in financial terms. Based upon this, Brown emphasizes 
the importance of financial objectives and formulates his argument upon 
the premise that all business decisions are ultimately financial decisions. 

At different times, business organizations become involved with ends 
other than the economic purpose. Moreover, the relative importance of 
the various objectives are perceived differently by different groups and in- 
dividuals. Tead classifies objectives into six distinct areas: legal, functional, 
technical, profit making, personal, and public. He suggests that each of 
these classes impose requirements which must be met in order to achieve 
over-all harmony for the enterprise. 

Gardner and Moore emphasize the fact that the objectives of a business 
are related to external and internal strategies. These strategies must be 
consistent with each other and with the over-all plans of the firm. Further- 
more, the nature of these strategies determines the degree of accomplish- 
ment of, and future evolution of, the objectives. 

Financial Objectives 

At the risk of being misunderstood, candor compels me to assert that an 
industrial enterprise is created and exists for the sole purpose of earning 

* Alvin Brown, "Financial Approach to Industrial Operations," a pamphlet prepared 
by the Society for Advancement of Management, 1957, p. 6-10. 



money for its owners; that the very condition of its existence is that it earn 
money. I know there are some who feel obliged to apologize for the finan- 
cial motive and who therefore portray an industrial enterprise as an insti- 
tution created to serve the public with scarcely a thought to its own 
financial welfare. I do not want to be thought a cynical person, with regard 
only for the dollar, but neither can I subscribe to a pretense that invites 
external misunderstanding and internal indifference. 

Of course, the self-respecting enterprise wants to be useful to the public. 
Of course, it wants to earn its money only in ethical, becoming ways. And, 
of course, it wants its members to 'be happy and comfortable in their jobs. 
But, after all, these are not charitable purposes, nor are they inconsistent 
with the basic purpose to earn money. Indeed, an enterprise can scarcely 
expect to be successful in its purpose to earn money unless it conducts its 
affairs with due regard to the rights and welfare of its customers, its mem- 
bers, and the public. 

Nevertheless, however its intentions may be decked out in propitiatory 
language, an industrial enterprise exists for the sole purpose of earning 
money for its owners. All of its actions, therefore, and all of the decisions 
that prompt those actions, are directed toward earning money. All deci- 
sions are financial decisions. 

All decisions are financial, either because they directly affect the expen- 
diture of money, or because they indirectly affect expenditures by consum- 
ing or disposing of effort, facilities, or material, all of which cost money. A 
decision to improve toilet and locker facilities may begin from a proper 
concern for the health and comfort of employees, but it requires an expen- 
diture, and every expenditure affects the earnings of the enterprise. All 
decisions are financial because you cannot conceive of one that does not 
affect, in one way or another, and in some degree, the earnings of the enter- 

Every Man Is a Financial Man 

A research man develops a new product. As you well know, that is not 
so simple a proceeding as words can make it sound. His performance is not 
an accident. He will not have spent his time on this development without 
foreseeing the result as nearly as he could. He will have foreseen as nearly 
as he could what it will cost to produce and market his new product, and 
what people will be willing to pay for it. He will have satisfied himself 
that these figures of cost and price bear an economic relation to each other. 
Were he not to foresee these effects as nearly as he can, he would risk a 
fruitless expenditure of his effort. He is too practical a man to take that 

In this sense, and to this extent, he has been a financial man. He could 
not have done his job properly except by so being. 

Of course, the research man may err in his calculations: of this it can 
only be said that we are all exposed to error from time to time. And, of 


course, he may neglect the prudent calculation that his job requires: of this 
it can only be said that he fails in his duty. Neither deviation impeaches 
the fact that he is a financial man in his approach to decisions. 

But the research man has taken only the first step in adopting a new 
product. Whether and how it shall be produced and marketed remain 
questions to be decided. To these decisions, the engineer, the production 
man, the merchandiser, and perhaps others, must all contribute. What they 
contribute are facts — the facts that each is skilled to obtain. To the facts 
so contributed, moreover, someone must apply reason — intelligence — so 
as to give them their proper weight, evaluate them, and relate them prop- 
erly to each other. This is the material — the foundation — of decision. This 
is the financial approach. 

This first example, however, is not typical. It is not every day an enter- 
prise decides whether to market a new product. But decisions are made 
every day. More often the question is whether to expand the facilities for 
an existing product, or whether to re-equip a process so as to reduce the 
cost of the product. Oftener still, the production man will be making de- 
cisions about the use of labor and material, the salesman about selling and 
advertising, the personnel man about employment. Each of these men has 
a primary operating function, but each must approach that function with 
a financial viewpoint because his decisions will affect the earnings of the 
enterprise. In that sense, each is a financial man. 

The Constellation of Goals 

I shall consider these several ^aspects of aims as (1) legal, (2) functional, 
(3) technical, (4) profit making, (5) personal, and (6) public. 

1. The legal aims of an organization are those which are set forth in its 
charter, constitution, declaration, etc. These are sometimes exceedingly 
general, sometimes quite specific. It is here that the central aim would 
usually be made explicit. The governing body presumably addresses its 
own efforts to this end more closely than do all the other individuals or 
groups involved. And if, as is true in business, the governing body, namely, 
a board of directors, is responsible to a body of stockholders on the one 
hand and is responsible for a body of hired employees on the other, the top 
administrators are presented with a problem, if not of dual allegiance, at 

* Ordway Tead, The Art of Administration (New York: McGraw-Hill Book Co., Inc., 
1951), pp. 12-21. 


least of dual solicitude in realizing the legally stipulated objective. Or, to 
put it differently, if the central aim is primary to those who are stock- 
holders but is only of secondary or even indifferent concern to employees 
because their direct connection with the aim is far less obvious to them, 
the task of administration is obviously increased in complexity. 

Clarity and preciseness about the legal aim are essential. Only so, can 
all involved begin to see the extent to which the means employed are 
proving to be a contribution to the end legally articulated. 

2. Functional aims are those centering on the performance of a social 
function, or the fulfillment of a social need, or the supplying a recognized 
demand for production of goods or services. Increasingly in economic life 
the pronouncements of executives in published statements of corporate 
objectives make explicit reference to the aim of securing a fair profit from 
the supplying of products or services needed by consumers. The idea of 
service through business widely publicized by the Rotarians may not al- 
ways be interpreted in the most profound way, but it represents an em- 
phasis and a moral justification for which businessmen seem more and 
more to feel the need as an acknowledged part of their total motivation 
and objective. Pride in the total corporate effort — in turning out a good 
product, fairly priced, with favorable consumer reception, and with cordial 
labor relations — this is an increasingly influential administrative aim of 
almost professional quality which cannot be ignored or minimized. It is 
an aim of good functioning. 

Creative, constructive and imaginative capacities of the highest order 
are thus invested in organization efforts by thousands of executives. And 
it is never easy to draw a line and say where creative drives for good social 
functioning dominate and where acquisitive and other impulses are con- 
trolling. More and more administrators themselves are testifying that pride 
of administrative workmanship is often a greater influence than amount of 
salary or rate of profit. 

In short, the functional aspect of corporate aims not only cannot be lost 
sight of, but it deserves greater prominence than it usually receives in any 
true understanding of the controlling factors in executive motivation. 

3. By the technical purposes are meant the more specialized, planning 
and engineering efforts to assure the maximum utility of technological 
equipment and process requirements. While this obviously is only an im- 
plementing or subsidiary purpose, it may assume large proportions in the 
minds of certain executives. Especially in those business organizations 
where trained engineers are largely in control, pride in technical superi- 
ority often looms large in administrative thinking. 

The whole problem of technological, obsolescence and the introduction 
of newly invented improvements is one fraught with great administrative 
consequences, especially where the displacement or replacement of large 
numbers of the working force may be entailed. The proper balancing of 
technological and of humane considerations in such situations is crucially 


important. For in the past all too often professional engineering pride has 
weighed so heavily in administrative thinking that blind spots to other 
aspects of the total operation have meant a total eclipse of human relations 
interests. Such professional preoccupation can be so dominant as to be- 
come a controlling purpose, even if its efforts are only means to the central 

Indeed, this precisionist concern about process is to be found in other 
than technological areas, wherever a prescribed pattern as to the ways of 
getting the job done is rigidly held to by administrators preoccupied with 
methods they may have learned and become thoroughly habituated to in 
earlier years when they occupied lower rungs on the executive ladder. 

(4. Profit making is an explicit, central and legal aim of many organiza- 
tions, including virtually all privately organized business corporations. 
Also, to operate without loss within a given budgetary situation of avail- 
able financial resources is a necessary secondary aim of most non-profit 
organizations. But the extent and influence of this aim in business re- 
quires careful analysis because the facts are more complex than the theory. 

The making of profit in each fiscal year is by no means achieved by every 
business. The figures of the first few years in the 1940's show on the average 
that only about two-thirds of the active corporations made a definite profit. 

The concept of profit needs careful scrutiny. Here it means the net sur- 
plus which is earned by a corporation after all legitimate operating costs, 
fixed charges, depreciation and obsolescence costs are met. Some of this 
surplus is typically paid to stockholders as "earnings on their investment"; 
and some of it is usually retained in the business to give more liquid 
resources, to provide for expansion, to help pay dividends in less favorable 
years, or in other ways to meet the unforeseeable contingencies. To the 
extent that surplus is devoted to plant expansion or is otherwise held in 
the business, it adds to the value of the shares owned by the stockholders. 

The rate of profit not only varies greatly from company to company and 
from year to year, but there is no fixed rate which is generally regarded 
as the right, just or socially defensible one. The line between what is ad- 
judged to be legitimate profit and what may be criticized as "profiteering" 
is a fine one; yet to invoke any universally acceptable standards is all but 
impossible. The climate of public opinion affects decisions here in ways 
that on occasion curb business practice and outcomes and even lead to 
some effort to disguise or minimize the facts of a high profit showing. 

It is thus necessary, in considering profit as the end, to see its two separa- 
ble functions. Profit is, first, the index of the survival possibilities, of an 
enterprise under current, accepted, standards of corporate operation and 
accounting methods. And it is, second, the measure of the extent of net 
monetary gain which has resulted. 

As to profit as an index of survival possibilities, if our economy is viewed 
as a whole, and if no companies showed a profit, there would be no re- 
sources available for capital development or plant expansion, unless they 


were taken from public revenues secured from taxation. And failing some 
such outside source from which losses could be recouped, the companies 
would be bound sooner or later to liquidate. In an economy of public in- 
dustrial operation, as in Russia, all surpluses earned in producing units 
are turned in to the national treasury and from there are allocated into 
the desired new channels of capital development or other use. And if no 
surpluses result, the administrators are presumably "on the carpet." 

As to profit as the measure of gain which is acceptable to owners or 
tolerated publicly, our economy has no absolute standards. We do, how- 
ever, invoke accepted methods of corporate taxation including on occasion 
"excess profits" taxes. Both of these are designed to put some check on 
what may publicly be regarded as "excessive" earnings. In short, the avowed 
purpose of making a profit today is qualified and modified for administra- 
tors by recognized social controls which the people as a whole have seen 
fit to impose. Indeed, if we look at those companies defined by law to be 
"public service companies," we see an even more stringent and explicit 
imposition of limits upon the profit which may be earned. 

However central and single the profit-making motive and aim may seem 
to be, it is thus increasingly a qualified aim — qualified by a public opinion 
which is variously expressed, no less than by the outlooks of individual 
administrators, to say nothing of labor union officials and workers. There 
thus arises in ways not as yet completely formalized a disposition to pose 
tacitly through one or another more or less public channel such questions 
as: How much profit; for whom; and by what means? It is of prime oper- 
ating importance for the enlightened administrator to be aware that these 
questions are much in the air and have on occasion to be specifically con- 
fronted by him before one or another tribunal. Such awareness increas- 
ingly acts as a modifying influence upon the singleness of his aim in the 
direction of profit. 

Another modifying factor has also to be reckoned with. Stockholders and 
top managers are generally no longer the same persons. The head execu- 
tives of a large number of businesses have small holdings of the stock of 
the company which they manage. They are themselves, at least legally, in 
the position of hired aides and not owners. Their connection with the 
stockholders is not close, usually confined to the reporting of results at 
annual meetings. And if these results are on the black side of the ledger, 
if a reasonably good showing is being made, few, if any, stockholder ques- 
tions arise. The pressure upon the salaried administrators of a business to 
keep a single-track mind which subordinates all else to profit making is 
thus considerably tempered. Significantly, the exception to this statement 
is usually in those cases where an executive bonus tied to profit amounts 
is in effect. But to lay it down as an unassailable dogma that considerations 
of profit making constitute the all controlling and simon-pure aim of ad- 
ministation is just not the truth. Motivations are far more complex and 


(5.; The personal aspects of organization aims are an actuality which is 
often slighted in the effort to understand motivation forces in organiza- 
tions. The desire to be accorded prestige for a job well done, or to have 
a status of recognized eminence, or to have the reputation for being a 
conspicuous success in some or all phases of management, or even just to 
exercise power because ego-maximization is a satisfying experience — all 
of these are possible manifestations of the administrator's personal ob- 
jectives. Every experienced executive and observer have known numerous 
instances where such personal influences have proved to be stronger mo- 
tives than all the rest which might have weight. True, it is frequently 
impossible to separate these personal preconceptions, ambitions, outlooks 
and vanities from the rationalized pretexts set forth by executives as to 
their aims in advancing certain policies. And such personal predilections 
of interest or prejudice can become so controlling that organizations are 
actually hampered and weakened in their effective operation. Instances 
come readily to mind of top executives who have taken such a "die-hard" 
view of dealings with organized labor, for example, that it has taken the 
corporation years to overcome the attitudes of conflict and hatred that 
they have thus been responsible for creating. 

On the more positive side, also, top executives with strongly personalized 
aims and special interests will spend money on their pet projects out of 
all rational relation to other expenses or to demonstrable benefits. In- 
stances of this are a passion for immaculate factory housekeeping, the 
maintenance of an elaborate company hospital, the conduct of a splendid 
company lunchroom or motion picture theater at an operating loss. 

Supporting evidence for this view, if such be needed, is interestingly pre- 
sented by that discerning student of administration, Chester I. Barnard, 
formerly President of the New Jersey Bell Telephone Company, when he 

In the broad sense that no business can escape its balance sheet, it is true that 
the economic or money motive governs the administration of business. Neverthe- 
less my observation in several different well-managed businesses convinces me that 
business decisions are constantly being made that are not based on economic mo- 
tives. This is something that businessmen seldom admit, and of which they are 
frequently unaware. Prestige, competitive reputation, social standing, philan- 
thropic interests, combativeness, love of intrigue, dislike of friction, technical 
interest, Napoleonic dreams, love of accomplishing useful things, desire for re- 
gard of employees, love of publicity, fear of publicity — a long catalogue of non- 
economic motives actually condition the management of business, and nothing 
but the balance sheet keeps these non-economic motives from running wild. Yet 
without all these incentives I think most business would be a lifeless failure. There 
is not enough vitality in dollars to keep business running on any such scale as we 
experience it, nor are the things which can be directly purchased with money an 
adequate incentive. 1 

l Chester I. Barnard, Organization and Management (Cambridge, Mass.: Harvard 
University Press, 1948), pp. 14-15. 


So important is it for all of us, including administratorsi-to stand well in 
the eyes of those whose approval we desire that if one can know the type of 
people with whom a given administrator hobnobs and "compares notes," 
one will have a good idea of the general line which his decisions are likely 
to follow. Tell me whose commendation the executive seeks, and I will 
tell you in which way his purposes and policies will be slanted. 

It is because of this truth, also, that the selection of the business, indus- 
trial, commercial and trade organizations with which companies and ex- 
ecutives become associated is of importance. For the policies and platforms 
of such associations can readily color the individual thinking of members 
and give them moral reinforcement on behalf of those policies which the 
association supports. Enlightened leadership in all types of business associa- 
tions can thus have a far more beneficent influence than will ever appear 
on the surface or be recorded in its reports. 

All of this is simply the recognition of what should be the obvious fact, 
namely, that scientific objectivity and a disinterested balancing of all pos- 
sible aspects of corporate aim on the administrator's part are an ideal which 
organizations may hope to approximate but rarely achieve. The capacity 
to weigh evidence and to generalize, unaffected by one's personal interests, 
is not a common attainment. But there is reason to believe that this is a 
capacity which education directed to this end can develop much more 
generally. Indeed, if collegiate schools of business did nothing more than 
inculcate this disinterested and objective problem-solving capacity in their 
students, they would be passing on a priceless boon. 

/t> v A final and potent factor in the modifying of aims is the influence of 
public sentiment from various sources. To adjust to recognizable and im- 
portant influences, demands and claims has thus become one aspect of aim 
which has now attained a new significance. 

Among such influences is consumer opinion. But because it is a fairly 
familiar and recognized factor, it will not be here further elaborated upon. 

Rather, certain other less emphasized public influences merit more ex- 
plicit treatment. For it seems certain that these will increase in vigor and 
in range as time goes on. Mention has already been made^of the regulative 
aspect of taxation over coporate financial operations/jLabor laws of all 
kinds, social security legislation, antitrust laws, fair business practice re- 
quirements, financial reporting requirements for "listed" securities — these 
at once come to mind as instances of public rules within which the game 
of business has to be played. The corporation is a creation of the state, 
and the state properly specifies certain provisions requisite for retaining 
a franchise. And if the public conscience and public standards are* more 
sensitive and more inclusive than formerly, these are facts to be reckoned 
with before rather than after offenses against these standards have been 
committed. Such matters, also, as adequate old age pensions, employee 
"welfare funds" and an annual wage are further examples of outside pres- 
sures for policy alteration which it will be impossible and undesirable to 


ignore. And when such pressures become imperious, they do in fact qualify 
present corporate aims. Indeed, to reckon with and anticipate the various 
changes in public, consumer, labor union and worker reaction — reflected 
in law, administrative decree or collective agreement provisions — becomes 
a major administrative responsibility. Only in the full acknowledgment 
of these interposing influences does the work of administration proceed 
intelligently. In fact, a stage seems to have been reached in public attitudes 
about numerous aspects of corporate operation where open resistance by 
corporate heads may lay them open to adverse sentiments harmful to their 

There are still other less sharply focused sentiments abroad in the land 
of which it will be shortsighted for the administrator to be oblivious as he 
shapes his policies. One example of this, elaborated upon in a later chapter, 
is suggested by the recent comment of a prominent executive that "it is the 
job of management to make democracy work." If in important particulars 
our corporate agencies operate in what is publicly felt to be undemocratic 
ways, that fact can have adverse consequences. The American people may 
not yet know in any widely agreed and specific terms what they mean by 
"industrial democracy," but tha.V\somehow corporate and other organiza- 
tional controls and procedures have to be more democratic in nature is a 
sentiment which is gaining unmistakable momentum in the American 
community. And it is a sentiment, no matter how crudely it may today 
manifest itself, to which corporate administrators surely have to become 
more sensitized. For many new expressions of desired changes in policies — 
legislative on the one hand and voluntary on the other — which otherwise 
may seem to some executives arbitrary, irrational, selfish and threatening 
to their customary freedoms are in reality manifestations of a groundswell 
of concern for an extension of democratic influences and of a kind of free- 
dom which seeks to attain the general well-being of more and more citizens. 

Another growing attitude which conditions managerial purpose is that 
it is necessary to reconcile so far as practical the personal desires and satis- 
factions of individuals with the announced aims of the agency which em- 
ploys them. Persons have a justifiable integrity and worth in their own 
right; the fulfillment of personality potentials is a valid demand. What 
this means in terms of rounded life activities and its implications for the 
needs and desires of people at work has still to be spelled out. But the pur- 
pose of such a reconciliation of personal and corporate goals is increasingly 
being recognized as imperative. And it is a purpose, call it primary or sec- 
ondary as you will, which requires a growing place in administrative think- 

How these plural organization and managerial aims come into being 
and how they are tempered by forces within and outside the organization 
is what we have just been considering. The conclusion is clear that the so- 
called "legal" or "central" aim is rarely as absolutely in control as is often 


assumed. Other secondary, supplementing and supporting aims do and 
should have varying weight. And for the administrator to realize and be 
mindful of these other aims, without which he cannot achieve the primary 
one, becomes more and more crucial to wise strategy. 

A second conclusion which emerges from this analysis of the several cor- 
porate aims is that not all of them are likely to have the same appeal for 
the rank and file. In fact, the workers may even oppose certain of these 
aims as they work out in practice. Or even if the purposes as such are not 
opposed, the going ways of realizing them may give rise to conflicts of point 
of view or interest. Indeed, real divergences of outlook as between man- 
agement and men may grow out of mistaken understanding first, as to 
what purposes are in control and, second, as to what a specific group's true 
interests really are. 

In short, if there are to be the necessary efforts toward a harmonizing of 
purposes and reconciling of interests, if purposes are to be broadly shared 
and special group interests subordinated to larger loyalties, there has to be 
further exploration of the appeal of different purposes and of the ways and 
means of assuring their more inclusive acceptance. 

The Dynamics of Business Objectives 

If we examine the objectives of any business, they appear at first blush 
to be simple and uncomplicated. Sears, Roebuck and Company, for ex- 
ample, sells goods direct to the consuming public; United Air Lines pro- 
vides air transportation; Corn Products Refining Company grinds corn; 
and each company performs these functions at a profit. The picture ap- 
pears complete enough; yet it lacks something! It is too dead, too static! 
There is no explanation of the dynamic aspects of business enterprise, of 
the drive, motivation, and compulsion which characterize men in business. 

Our description assumes that each company more or less passively oc- 
cupies a particular technological or economic position in our society. It 
in no way describes the manner in which this position has been secured by 
the business enterprise in question, nor does it even suggest the struggle 
and effort which goes into the maintenance and development of this posi- 

* Burleigh B. Gardner and David G. Moore, Human Relations in Industry (3rd ed.; 
Homewood, 111.: Richard D. Irwin, Inc., 1955), pp. 2-6. 


tion once secured. The fact remains that a business enterprise is not just 
an organization fulfilling certain technological or economic functions. It 
is a far more active force than this. Indeed, it is largely a dynamic expression 
and embodiment of the efforts of a group of men to secure, consolidate, 
and extend a profitable position in the business community. 

We all know, at least abstractly, that any business, to survive and prosper, 
must maintain a set of relations with various elements in the socioeconomic 
environment. These elements are, for the most part, described in terms of 
certain socioeconomic roles, such as investors, customers, vendors, manage- 
ment, labor, etc. Each of these groups supply one or another of the essen- 
tial "ingredients" of business enterprise. Investors supply money; vendors 
supply materials, machines, tools, and products; customers supply buying 
power; labor supplies skill and work effort; etc. Each will provide the 
necessary "ingredients" which are in his power to give if he is "induced" 
to do so. 

The major questions in every businessman's mind are: "How can the 
other party be 'induced' to part with his money, materials, machines, tools, 
goods, labor, ideas or services?" and "How can a 'gain' be secured in these 
transactions?" Finding answers to these questions is intriguing but difficult 
because the socioeconomic environment with which the businessman must 
deal is complex, frequently unpredictable, and constantly changing. It is 
apparent that the businessman cannot have complete information about 
the world around him. Therefore, his answers often are simply good 
guesses, based at best on an analysis of probabilities and at worst on pure 
hunches. The test of his guesswork lies in what happens in the future. 

In spite of the difficulties, the socioeconomic environment can be ma- 
nipulated and controlled in various ways. However, you have to find the 
right formula or strategy, 1 and play it to the limit. Indeed, it is frequently 
in the determination, single-mindedness, and purposefulness of the player 
that we find the difference between success or failure in business. A busi- 
nessman can, if he is imaginative and aggressive, envision and act on a 
business situation not yet perceived by others. He can, if he is persuasive, 
change the perception of others regarding a particular business situation. 
Within certain legal and ethical limits, he can utilize every political, psy- 
chological, social, technological, and economic device in the books to 
achieve an advantageous position. 

Our description is by no means complete. However, we can begin to 
sense the dynamic aspects of business enterprise. It is essentially a game of 
strategy in which the participants seek the right formula for dealing with 
the various elements of the socioeconomic environment. It is a purposeful, 
goal-directed game where every move should fit into the over-all strategic 
objectives of the business. It is an undertaking where the stakes are high, 

l John Von Neuman and Oskar Morgenstern, Theory of Games and Economic Be- 
havior (Princeton: Princeton University Press, 1944). 


where control is possible, and yet where there is sufficient unpredictability 
to provide an element of chance. This is the kind of situation, it will be 
recognized, that excites people, motivates them, puts them on the edge of 
their chairs. It absorbs interest and attention, concentrates energies, and 
creates an almost consuming interest. As one businessman said, "Never get 
involved with the stock market. It's like a drug addiction." While most 
businessmen are not as keyed up as our description would indicate, never- 
theless, something like this underlies the compelling drives and interests 
of business management. Under these circumstances, it is understandable 
why problems of human relations in industry sometimes appear outside 
the world of reality to management. 

Development of Business Organization 

Thus far, we have been discussing business activity in its purely com- 
mercial and entrepreneurial sense without reference to business organ- 
ization. Our purpose has been to understand the mainsprings to action in 
the business world because they have a direct and powerful influence on 
the needs and interests of management, the decisions it makes, and the 
kind of organization it develops. 

Few businesses begin with a full-blown organization. An organization, 
after all, is an expensive apparatus. Unless a business activity exists to 
support it, even a small organization, with its machinery costs, material 
and power costs, and especially payroll costs, is impossible. Most business 
organizations tend to evolve and develop through more or less well-defined 
stages. The first stage is the creation of the business activity itself. Busi- 
nesses come into existence in a variety of ways. However, the process is 
largely the same. Someone or some small group of individuals possesses, 
develops, or stumbles on potential assets or resources which, when com- 
bined with certain other assets, provide the conditions favorable to the 
development of a business. A potential asset can be almost anything — 
money, real estate, talent, skill, class position, personality, and invention, 
or what have you. The act of combining is the crucial element of a creative 
strategy; a single asset is valuable only in combination. 

The strategy in this initial stage, then, is twofold: envisioning an ad- 
vantageous situation and doing something about it. An advantageous com- 
bination might be something as mundane and unoriginal as putting Aunt 
Mabel's bequest and Junior's interest in tinkering with other people's auto- 
mobiles together with an empty lot on a busy corner and opening a gas 
station. Or it may be as imaginative and unique as combining, in the man- 
ner of Henry Ford, mechanical ingenuity, a buggy, a gasoline engine, and 
new ideas of mass production to create an automobile industry. 

The creative strategy of a business is frequently undeveloped and un- 
balanced in its initial form. It tends to emphasize the special interests, 
talents, posessions, behavior, and general orientation of the founding 


father. If the business is to survive in a competitive and changing world, 
the original strategy and business activity developing therefrom must be 

Most businesses tend to go through a rather rapid evolution in which 
all of the necessary economic relationships which the business must main- 
tain are secured and developed. Thus, the new business which starts off, 
let us say, with a new product quickly develops a sales strategy, a system 
for financing its needs, a way of securing necessary materials and equip- 
ment in the right quantities and at the right time, and a method of han- 
dling all of the other relationships typical of a modern business. If the first 
stage of a business requires a promoter, the next stage requires a business- 
man or consolidator. This is the stage when the business develops "sound 
business practices." 

As the business grows and problems of getting the work done increase, 
a new stage is reached — that of organization. The excess work and new 
functions created by the consolidation of the business must be accom- 
plished through people and/or machines. At first the organization may 
develop in a haphazard fashion; an employee or machine is introduced 
here and there to handle a specific activity or function. However, at some 
point in the growth of the business, a strategy of organization emerges. 
Thus, the organization itself becomes a strategic device for insuring an 
advantageous position in the socioeconomic environment. This is the stage 
of the manager or administrator. 

A mature, established business organization develops, over a period of 
years, a set of strategies for dealing with all of the important elements of 
the socioeconomic environment. Certain strategies have to do with the way 
the organization fits into the chain of economic and technological events 
which mold and process the materials of the earth and distribute the prod- 
uct of these efforts to the customer. A business or industrial organization 
must maintain and develop its relations with those socioeconomic groups 
which precede it in the economic chain — that is, its sources of money, 
machines, tools, and materials — and those which follow it — that is, its 
customers. These strategies have to do with the economic metabolism of 
the organization, its intake and output. They also define the particular 
technological or commercial activity of the organization — what it does for 
a living, so-to-speak. For want of a better designation, we can refer to these 
strategies as the external economic strategies of the organization. 

Other strategies concern the relations which the organization maintains 
with the broader community, including the general public, government 
bodies, organized charities, schools, etc. Here we view the organization as 
a social entity having certain rights and privileges, duties, and obligations. 
These strategies we call external social strategies. 

Finally, there are strategies which have to do with the way in which the 
organization does its job; the way in which employees are motivated, co- 
ordinated, and controlled; the technology and use of machines and tools; 


the division of labor; hierarchy of authority; etc. These are the strategies 
of management with which we are primarily concerned in this book. We 
call them the internal organizational strategies. 

The strategies which develop in a company for dealing with its external 
and internal relations are many and varied but reasonably consistent. In- 
deed, it is surprising to observe the manner in which new strategies are 
built on the old. In a way, a business tends to develop like an individual, 
that is, developing new patterns of adjustment which are consistent with 
its past experiences and previous modes of behavior. Most companies ap- 
pear to develop a kind of business ''character" or "personality" which dif- 
ferentiates them from other companies. 


Planning and Decision Making 

Planning is a prerequisite to successful operations. A major share of busi- 
ness failure is attributable to inadequate planning. Successful organiza- 
tions owe their eminent positions in part to careful planning and maintain 
their high rank by insisting upon accurate and exhaustive plans. Moreover, 
today's management is finding that planning is becoming increasingly im- 
portant and complex because of long-term contracts and commitments. 

Plans and performance standards must be established in the light of the 
over-all objectives of the organization. However, it is implementation and 
execution which ultimately determine the character role or corporate per- 
sonality of a firm. Assuming that the existing character role of a group is 
desirable, operating policies and strategies must be formulated with due 
cognizance of this role. Buchele discusses the nature and function of the 
corporate personality. 

Policies, themselves a product of planning, are vital in accurate oper- 
ating decisions. Effective accomplishment of objectives is dependent upon 
exhaustive and directive policies. Glover discusses the attitude and under- 
standing required for policy making as well as the important considera- 
tions involved. 

Decision making is the culmination of the planning process, i.e., the 
choosing from among alternative courses of action. Nonetheless, decision 
making is not a simple, mechanical choice. It involves two highly complex 
evaluations: desirability judgments made from value premises and proba- 
bility judgments made from factual premises. In addition, it is a mental 
process compounded by all the vagaries of the human element. When the 
process is placed in an organizational context, it takes on additional com- 
plexity. Tannenbaum establishes a framework for understanding decision 
making, discusses the steps involved, and then analyzes the environment 
within which the process takes place. 

Managerial decision making has been aided by developments in the 
quantitative approach. Many disciplines such as mathematics and eco- 
nomics have contributed to this approach, enabling management to make 
increasingly accurate predictions. As a result, the ability to control business 
activities has greatly increased. The quantitative approach in management 
today can be exemplified by operations research, a method of attack and a 



set of related techniques for solving business problems. The article by 
Crawford presents an examination of operations research and its applica- 
tion to certain decision making areas. 

Planning and decision-making can become a creature of tradition and 
habit. If not that, it may become a highly mechanistic process. The con- 
cepts and art of creative thinking find their purpose in overcoming the 
stultifying effects of such possibilities. Mee presents a top-level approach 
to creative thinking and outlines the steps involved in the process. 

Since a plan involves futurity — the past is important only as it affects 
factual premises, uncertainty is a continuing element of planning. Where 
uncertainty is relevant, strategy is commonly employed. Shubik offers an 
interesting introduction to the application of game theory to business as a 
technique for dealing with strategic situations. 

The Corporate Personality 


Do Companies Have Characters? 

What constitutes a company's character? How can the characters of com- 
panies be classified? 

The idea that business firms do have unique characters is a rather new 
concept; in consequence, writers on management subjects have not yet 
brought the term "character" into common usage in describing the dis- 
tinguishing attributes of business units. Those writers who have attempted 
to assess the characters of business units have used the terms "leadership 
climate" or "organizational personality" or "environmental factors" or 
"quality of managers." 

In an article appraising the quality of current top-level managers, the 
President of the American Management Association has classified them 
into four categories: The Clear in Purpose and Sound of Action, The Sin- 
cere in Desire and Earnest in Effort, The Unaware and Unfortunate, and 
The Anti-Social and Outmoded. 1 His discussion of these types indicates 
that they differ according to the extent to which managers use modern 

* Robert B. Buchele, "Company Character and the Effectiveness of Personnel Man- 
agement," Personnel, January, 1955, pp. 289-90, 295-98. 

l Lawrence A. Appley, "A Current Appraisal of the Quality of Management," Pro- 
gressive Policies for Business Leadership, General Management Series, No. 156, (New 
York: American Management Association, 1952), p. 6. 


principles and techniques and the extent to which they accept their social 
as well as their economic responsibilities. 

Another classification of types of leadership is the familiar three-way 
breakdown into autocratic, non-interfering and democratic types. This 
concept and variations of it have been used widely in supervisory training 
programs. 2 Interest centers on the reactions within a group to its leader's 
actions — the manner in which orders are given, the extent and nature of 
the participation by members of the group in determining goals, whether 
discipline is imposed by the leader or by the group, and similar matters. 3 

One writer sees companies as having definite personalities which are the 
reflections of the personalities of their top executives. Accordingly, he em- 
ploys terms usually used to describe persons, terms such as "careful," "de- 
liberative," "analytical," "jovial," "imaginative," and "helterskelter." 4 

What is the answer, then, to the question: What constitutes the character 
of a business unit? Clearly, numerous writers are convinced that different 
firms do have unique characters that can be meaningfully classified in terms 
of constellations, or patterns, of traits. There are, however, so many differ- 
ences among the writers that no complete or final answer emerges. 

The various writers focus on different aspects of the managerial job, 
and some probe deeply while others deal only with surface manifestations. 

A description of business units drawn for the purpose of helping to 
formulate employee selection standards features 22 relevant "environ- 
mental factors." These include superficial items such as the age of em- 
ployees and how they dress, as well as substantial items, e.g., whether the 
firm prefers executives who are specialists or generalists, the use of up-to- 
date professional knowledge and techniques, the quality and amount of 
training given personnel, and the extent to which delegation of authority 
to subordinates is actually practiced. 5 

Still another writer, a student of supervisory practices and an advocate 
of decentralization of authority, sees a business unit's character as chiefly 
a function of its organizational structure. 6 In consequence, he classifies 

2 N. R. F. Maier, Principles of Human Relations (New York: John Wiley & Sons, Inc., 
1952), pp. 21-23. 

3 The original experimental work, carried out by psychologists with groups of chil- 
dren, is reported in: K. Lewin, R. Lippitt, and R. White, "Patterns of Aggressive Be- 
havior in Experimentally Created 'Social Climates,' " Journal of Social Psychology, Vol. 
X, (1939), pp. 271-99; R. Lippitt and R. White, "An Experimental Study of Leadership 
and Group Life," in T. M. Newcomb and E. L. Hartley, (eds.), Readings in Social 
Psychology (New York: Henry Holt & Co., 1947), pp. 315-30. 

4 J. Elliot Janney, "Company Presidents Look at Themselves," Harvard Business Re- 
view, Vol. XXX, No. 3 (May-June, 1952), p. 60. 

5 Milton M. Mandell, "The Effect of Organizational Environment on Personnel Selec- 
tion," Personnel, Vol. XXX, No. 1 (July, 1953), p. 16. 

6 James C. Worthy, "Some Aspects of Organization Structure in Relation to Pres- 
sures on Company Decision-Making," Proceedings of the Fifth Annual Meeting In- 
dustrial Relations Research Association, 1952. On p. 66 Worthy writes: "Organization 
structure 'per se' is one of the most pervasive influences on the system of human rela- 
tions in any functioning group." 


them at the extremes as flat-small-integrative or tall-complex-impersonal. 
To him, these are the basic factors, whereas those listed by some of the 
writers mentioned above are secondary characteristics. 

These differences arise because each writer is concerned with a somewhat 
different problem; and while each classification might have some validity 
for its own purpose, the classifications taken together are confusing. Per- 
haps a sharper focus can be drawn on the problem of what constitutes the 
character of a company by examining a single question: Why do different 
companies arrive at different results from similar personnel management 
programs and policies? 

A Framework for Understanding Company Character 

Professional executives seek to make thorough, objective analyses of the 
managerial situations confronting them. They seek to determine realis- 
tically what results may be expected in a particular setting from a par- 
ticular management program. To do this, however, they must have sound 
tools of analysis — tools that will bring to their attention all of the pertinent 
considerations without misleading them or wasting their time. Unfortu- 
nately, as one author expressed it: 

Administrative description suffers currently from superficiality, oversimplification, 
and lack of realism. . . . Until administrative description reaches a higher level 
of sophistication, there is little reason to hope that rapid progress will be made 
toward identification and verification of valid administrative principles. 7 

The confusion and incompleteness of our present classifications of com- 
pany character would seem to be an example of the inadequacy of current 
"administrative description." Not one of the classifications of company 
character set forth earlier in this paper covers more than a few of the many 
factors found to be important influences upon personnel management 

The checklist set forth below is designed to provide a comprehensive 
grasp of company character; perhaps it will help executives reach this 
"higher level of sophistication" in administration. In evaluating the set- 
ting into which a new personnel program (or, perhaps, any management 
program, such as a system of budgetary control or a decentralization pro- 
gram) is to be introduced, executives need to consider the following two 
broad groups of factors: 

A. Basic Considerations — The pervasive factors that affect almost all programs 
in virtually all firms stem from the fundamental organization structure and 
the actual nature of everyday working relationships in the firm. These fac- 
tors can be summarized under three headings: (1) Supportive programs and 
structures; (2) Decision-making and initiative expectations; and (3) Superior- 
subordinate relationships. 

7 H. A. Simon, Administrative Behavior (New York: Macmillan Co., 1949), p. 38. 


B. Special Considerations — The factors that may or may not be influential in 
a particular firm are those involving personalities of individuals and other 
unique conditions. These can be summarized under five headings; (1) Man- 
agers' personalities and interests; (2) Product and mission; (3) Profitability 
and growth; (4) Nature of work and work groups; and (5) Surrounding com- 

A . Basic Considerations 

1. Supportive programs and structures. It has been noted earlier that 
one firm realized virtually no benefits from its job evaluation plan because 
of the lack of supportive programs and materials (personnel records, job 
descriptions, merit reviews, and job standards) and the talents that lie 
behind such materials. However, another firm, having a full and expertly 
executed set of personnel management programs, realized many types of 
benefits from its job evaluation plan. Also, a third firm that had excep- 
tionally elaborate cost-control systems found that its job evaluation plan 
served only as another cost-control device. 

The principle is clear: The presence or absence of supportive programs 
and talents is an important influence on the results achieved by a particular 
managerial program. 

In attempting to forecast what results will be achieved by a new pro- 
gram, a systematic study should be made of the relationships of that 
program to the basic management functions of organizing, planning, staff- 
ing, directing, and controlling. A serious neglect of or unusual emphasis 
on any phase of management by a particular firm will in most cases become 
apparent when a competent analyst systematically evaluates these five basic 
management functions against appropriate checklist and data on standard 

2. Decision-making and initiative expectations. Probably the most com- 
mon errors in executives' appraisals of their own firms are those made in 
connection with the amount of authority that is delegated to subordinates 
and the amount of initiative expected of them. It seems to be hard for 
executives to face these facts realistically. It has been pointed out earlier 
that some supervisory training programs have advocated initiative in firms 
where such initiative was in practice strongly discouraged. Also, it has been 
noted that one firm reduced its high turnover among branch "managers" 
when it finally faced the fact in its selection program that these jobs did 
not involve significant decision-making authority or an initiative in pro- 
posing changes. 

It is appropriate, then, in studying the actual or potential results of some 
personnel management programs to ask: Which managerial levels actually 
make substantial decisions? What formal delegations of decision-making 
power have been made? Have these been effectuated by giving the subordi- 
nates the topside support, the information, and the training needed to 
make decisions effectively? Is change actually encouraged or discouraged? 
How do the rates of change in technological and administrative matters 


compare with the rates in other firms in the industry? Are subordinates 
given fair opportunities to know the firm's problems, to experiment with 
ideas, to keep intellectually and professionally progressive by attending 
outside meetings and training courses? Is initiative rewarded, or in actual 
practice do rewards go to the routine followers? Does the age distribution 
of higher level executives indicate a heavy reliance on seniority in pro- 

3. Superior-subordinate relationships. Does the program under con- 
sideration assume an ideal type of superior-subordinate relationship, or is 
it realistic in these respects? It has been noted earlier that some training 
courses in human relations for supervisors have failed where the super- 
visors themselves are working under superiors whose practices are incon- 
sistent with what is being taught. Also, communications programs have 
bogged down because the organizational structure was too complicated and 
elongated for them. 

The following questions are, then, relevant to the study of the results 
achieved by personnel management programs: Are relationships between 
superiors and subordinates at the various levels predominantly job-cen- 
tered or person-centered — are technical factors and "getting the job done" 
stressed to the neglect of human relations factors, or vice-versa? Are com- 
munications typically made with or without the participation and prior 
acceptance of subordinates? Is there mutual respect and confidence be- 
tween superiors and subordinates? Is the organization structure flat or 
elongated — does it facilitate or hamper two-way communications and par- 
ticipation by subordinates? Have the key employees become accustomed to 
working alone or as a team? 

B. Special Considerations 

While the three types of organizational considerations discussed above 
most often affect the results achieved with managerial devices, many other 
factors can, in particular situations, exert an important influence. 

If the top executive has a dramatic personality or unusual special inter- 
ests, he can cast a long shadow over the organization. Those top execu- 
tives having special interest in the social responsibilities of business firms, 
or in public relations, or in athletic and community activities, can help 
many of the employees build a strong loyalty and sense of identification 
with the firm. Conversely, particularly difficult top executives can cause 
the more promising young executives, who always have opportunities else- 
where, to depart, leaving the firm in the hands of the top man and a 
mediocre group of executives. 8 

If the firm's product is dramatic in nature, as in the case of combat air- 
craft, this fact can possibly help secure cooperation in programs that re- 

8 Executive turnover is on the increase. For a summary of three studies of this prob- 
lem, see: "Why Are Executives Changing Jobs?" Personnel, Vol. XXIX, No. 6 (May, 1953) 
pp. 454-55. 


quire employee participation and initiative. Or a firm's outstanding record 
of profitability and growth can tend to do the same thing. 

The chief characteristics of the work group — their ages, skills, educa- 
tional background, and other features — and the level of pay and working 
conditions can place limits upon certain managerial programs. So, also, 
can any unusual aspects of the surrounding community. 

Uses and Limitations 

What is the usefulness of this analytical framework? What are its chief 

First, the checklist is designed to be used in assessing the character of 
a business unit for a particular purpose; it should give many helpful in- 
sights into how a firm can or can not effectively use a particular managerial 
device. However, it does not attempt to arrive at a one-word character label 
or at a separation into "good" and "bad" categories. On the contrary, this 
framework should demonstrate the inadequacy of such brief labeling of 
company characters. While some executives still seek simple cure-all man- 
agerial tools, the more mature and professional executives recognize the 
true complexity of the art of administration. The latter realize that a too- 
simple analytical framework would be more misleading than helpful. 

Second, the checklist must not be applied too mechanically; there can 
be no simple weighing of factors. Rather, mature managerial analysis calls 
for situational thinking. Thus, even with respect to a single managerial 
device, a certain factor may be dominant in one situation but of minor 
importance or none at all in a second situation. Managerial programs are 
not standardized and interchangeable like automobile parts; they must be 
tailored especially to fit particular situations. 

Third, there will always be a question, in analyzing any particular prob- 
lem, of what units within a firm have unique characters that significantly 
affect the results achieved with a managerial device. For example, with 
respect to certain programs, the personality of a local foreman may be more 
important than the personality of the head of the firm. Or with respect 
to another program, a plant manager's patterns of decision-making may 
negate company-wide communications policies. 


Philosophy is a term whose meaning and scope have varied very consider- 
ably according to the use of different authors and different ages; and it would 
hardly be possible, even having regard to the present time alone, to define 
and divide the subject in such a way as to command the adhesion of all the 
philosophic schools. 

* John G. Glover, "Management Policy," Advanced Management, Vol. XVIII (March, 
1953), pp. 24-26. 


The statement above referring to the term philosophy, taken from the 
Encyclopedia Britannica, ninth edition, 1894, could be used today, without 
a single change in wording, to refer to the term policy. 

There is a philosophy of business and there are business policies, but 
they have been used and abused without too much consideration being 
given to the true meaning of either word. 

The modern dictionaries say "philosophy is the love of wisdom or knowl- 
edge, especially that which deals with ultimate reality." One of Mark 
Baldwin's concepts of philosophy is: "A theory of truth, reality, or experi- 
ence, taken as an organized whole, and so giving rise to general principles 
which unite the various branches or parts of experience into a coherent 
unity." According to the Encyclopedia Britannica: "The aim of philos- 
ophy (whether attainable or not) is to exhibit the universe as a rational 
system in the harmony of all its parts." 

In an economy of free enterprise, where intelligent competition is a 
dominant factor, it is essential for each member company to have and 
abide by a wise philosophy of enterprise recognizing its responsibilities and 
obligations to its owners, the public and to its employees. The accepted 
motives of business enterprise are to supply services or commodities to 
satisfy human wants and needs at a profit to the enterpriser. A philosophy 
of doing business includes the recognition of human beings as individuals 
and each employee as an important member of a team working to create 
the services or commodities required to satisfy human wants. Such a philos- 
ophy also includes the concept of their belonging to an organization which 
is proud of its personnel. 

In a free economy, idealistic concepts of business objectives require an 
enterprise philosophy commensurate with current thinking of progressive 
business leaders. 

Unfortunately the term policy is misused and abused horribly, being 
confused with the terms, objective, plan, rule, law and creed. An objective 
is purpose, aim or destination; a plan is a specification of performance 
mentally elaborated in advance of action; a rule is a prescribed guide for 
conduct; a law is a statement of an order or relation of phenomena in- 
variable under the given conditions; and a creed, a formula of faith or 

By definition a business policy is "an established guiding canon govern- 
ing the activities of business enterprise and from which the basic precepts 
of conduct are derived." 

The philosophy of an enterprise is communicated through its policies. 
Sound business policies provide a firm foundation to guide an enterprise 
and to aid management in keeping it on the planned course toward its 
ultimate objective. Policies create the means for unification and coordina- 
tion of business activities, tend to reduce the dependence of an organization 
on any individual, and are essential to operational planning, managerial 
control and efficient results at minimum costs. 


Business policies, then, are intrinsic control instrumentalities of man- 
agement, providing criteria for uniformity and continuity of business oper- 
ations. They are the coordinating media of managerial control but their 
application becomes impossible, until they are thoroughly understood. 

The articles of incorporation express broadly a company's basic policies, 
i.e., the Revolg Pharmaceutical Company's charter prescribes that high 
grade pharmaceuticals will be supplied to wholesale druggists. 


A canon, to be a true business policy, must possess the following char- 
acteristics common to all business policies: 

1. It must delineate clearly the objective from which it is derived. 

2. It must be in understandable writing. 

3. It must prescribe criteria for current and future action. 

4. It must be stable but amenable to change, consistent with economic condi- 
tions and business requirements. 

5. It must be a canon from which precepts of conduct can be derived. 

6. Its edict must be capable of being accomplished. 

7. It should prescribe method of accomplishment in broad terms, but allow for 
the discretion of those responsible for preparing the precepts of conduct. 

8. Its derivative rules of conduct must not be subject to the discretion of those 
who are governed by them. 

The first characteristic of a business policy, then, is an expression of 
objective. To sell only a high grade of pharmaceuticals. It is a fair assump- 
tion that if the company keeps on selling a high grade of pharmaceuticals 
at a reasonable price and making a consistent profit, the long-term objective 
of stability and perpetuity will be accomplished. A policy must be inter- 
preted in terms of precepts, and a policy objective must be expressed in 
terms of work. 

The second characteristic of a business policy necessitates a precisely 
written statement so that there can be no misunderstanding of the con- 
comitant precepts, and so that all persons concerned may be thoroughly 
familiar with its true interpretation in common meaningful terms. Usually 
it can be said that company policies are contained in the policy manual 
for use by executives. Each executive responsible for interpreting policies 
in terms of workable rules and preparing these precepts of conduct for 
guidance of operations should have a copy of the policy manual or at least 
that part of the manual which governs the conduct of his particular di- 
visional activity. 

The third characteristic of policy is futurity — a corporation by definition 
is created to perpetuate itself — immortality being one of its characteristics. 
Thus the general canons or policies must be formulated on the basis of 
corporation perpetuity, and the inference of perpetuity is profitable op- 
erations — the ultimate objective. It will be recalled that sound business 
policies provide a firm foundation to guide an enterprise and to aid man- 
agement in keeping it on the planned course towards its ultimate objective. 


Thus, a business canon or policy prescribes future guidance of enterprise, 
and demands the delegation of proper authority to those who develop the 
precepts of conduct of current and future operations under recurring 
circumstances. A policy, through this fundamental of futurity alleviates 
management from the responsibility of requiring specific authority to per- 
form a duty or to take action under known circumstances each time they 
reoccur, thus, relieving management of the obligation to reach routine de- 
cisions. The policy to sell the best grade of drugs only is the authority by 
which the general manager of the pharmaceutical plant issues the order 
to his purchasing agent to buy the best grade of raw materials and to his 
plant laboratories, to examine the raw drugs upon arrival at the receiving 
division. Plant inspecting laboratories are responsible for examination of 
products during processing. 

A policy is management's authority to take the appropriate action. 

The fourth characteristic of business policy is stability but so flexible 
that it can be changed to suit the circumstances without disrupting the 
company's operation to any great extent. A stable policy creates confidence 
but a vacillating policy courts disaster. 

It is seldom possible to forecast changes with accuracy in economic and 
social conditions, but when these cyclical changes occur they may or may 
not warrant a change in policy. By the same law of human nature it is 
difficult, if impossible, to formulate a policy representing the secular trend 
of an enterprise with such foresight as is necessary to make the policy ap- 
plicable over a long period of time without variation. If a policy change 
is necessary, it should be accomplished as soon as possible and in such a 
manner so as to prevent shock and permit desirable operating adjustments 
without decreasing the efficiency and effectiveness of labor relations, pro- 
ductivity and customer relations. Flexibility, then, warrants justifiable 
exceptions to cope with legitimate economic change. 

Because policy formulation is a continuous dynamic process governing 
collective activity and group operation, there must be awareness of change 
and appropriate action taken or the process becomes static, and the policy 
will fail to fulfill its purpose. To be continuous, the process must provide 
for flexibility of policy consistent with economic circumstance, change in 
nature of business and change of business objective. 

With accomplishment of objective as the premise for policy formulation, 
a policy must be stable in relationship to growth and continuity of the 
enterprise; but susceptibility of policy to change is not a preventive of 
policy stabilization. Needless to state, that policy stabilization is an essen- 
tial contributing factor to effective futurity planning and by reason of 
policy being a canon of invariable progressive but never final guidance; a 
policy must be subject to modification, alteration and melioration when 
and if better methods, procedures and practices have been developed. 

Policies must be put to the test of day-to-day operations, and their sound- 
ness must be established before they are finally adopted. Once accepted 


their precepts must be enforced until cyclical business movements or vari- 
ations within the enterprise call for change-making adjustment of policies 
imperative. Constant and consistent review and analysis of all policies are 
required to insure their current effectiveness and to be assured that all per- 
sons within the company abide by the preceptive tenets and understand 
the rules of conduct. 

If policies are to serve their designated purpose, they must be maintained 
as living and vital canons of managerial guidance, coordination and con- 
trol. A policy must not be allowed to fade into obscurity through neglect 
or lack of understanding of its concepts. If a policy has outlived its useful- 
ness it should be abolished and replaced by one which will be fruitful. 

The fifth characteristic of a policy is that it must be a canon from which 
precepts of conduct can be derived. A policy must be a principle or founda- 
tion upon which to build the edifice of objective accomplishment. L. H. 
Kurtz of General Motors Corporation ably defines policy as the "con- 
science" of business enterprise. 

The sixth characteristic of policy is that the prescription of the policy 
must be capable of being achieved, accomplished or completed. A policy 
being a canon and a guiding instrument must be prepared or developed 
properly and put into practice with care and understanding. Because the 
charter objective must clearly delineate the purpose for which an enter- 
prise is established, it is the specific duty of the owners or administrative 
management to create and develop an effective philosophy for policy con- 
struction which is capable of being recorded in the policy manual and 
becomes a guide to those executives for whom it is intended. 

The seventh characteristic of a policy is its prescription of methodology 
of accomplishment expressed in broad indicative terms — to manufacture 
high grade pharmaceuticals. The broad term "to manufacture" clearly in- 
dicates research, equipment, plant and personnel. One realizes that policies 
at this point must yield to the development of concepts, plans and precepts 
of conduct and that wise discretion must be part of executive judgment, in 
preparing operational plans and prescribing rules of conduct. Thus, poli- 
cies reach to the executive or departmental level in the form of internal 
operational policies governing the activities of the department as a whole. 
The implementary mechanics of policy are usually recognizable at the de- 
partmental level in the form of precepts of conduct. It is here, where the 
head of a departmental unit aided by staff management and the executive 
members of his organization, converts the internal operational policies 
into precepts of conduct for his supervisory and working force. Board plans 
for action originate at the administrative level but find refinement at the 
executive level aided by staff management. 


Decision Making and Operations Research 

The Nature of Decision-Making 1 

Introduction. Human behavior results from either unconscious or con- 
scious processes. When these processes are conscious, decision-making is 
involved. 2 Decisions, when made, affect the behavior of an individual. 3 An 
individual may make decisions which affect his own behavior, or he may 
make them to affect the behavior of another or others. In the latter case 
social processes are involved. 

In the preceding article it was concluded that managers are those who 
use formal authority to organize, direct, or control responsible subordinates 
in order that all service contributions be co-ordinated in the attainment of 
an enterprise purpose. One of the most important techniques of managers 
is that of decision-making. This technique pervades the performance of all 
the functions of managers. 4 In order to organize, direct, or control respon- 
sible subordinates, managers must make decisions which affect the behavior 
of those subordinates. The decisions of managers are made not to affect 
their own behavior but rather that of others. On the other hand, non- 
managers, in performing their work, must also make decisions, but these 

* Robert Tannenbaum, "Managerial Decision-Making," Journal of Business, Vol. 
XXIII, No. 1 (January, 1950), pp. 22-39. This is the second of two closely related articles 
by the writer. The first, entitled "The Manager Concept: A Rational Synthesis," ap- 
peared in the October, 1949, issue of the Journal of Business. See the section of this 
text entitled, Summary. 

1 In the writing of this section I have been greatly stimulated by Herbert A. Simon, 
Administrative Behavior (New York: MacMillan Co., 1947). Many of the ideas pre- 
sented herein were developed by me before Mr. Simon's book came to my attention. But 
his clear analysis has sharpened my own thinking with respect to many points. 

2 See Chester I. Barnard, The Functions of the Executive (Cambridge: Harvard Uni- 
versity Press, 1938), p. 185: "The acts of individuals may be distinguished in principle 
as those which are the result of deliberation, calculation, thought, and those which are 
unconscious, automatic, responsive, the results of internal or external conditions present 
or past. In general, whatever processes precede the first class of acts culminate in what 
may be termed 'decision.' " Cf. also Simon, op. cit., pp. 3 f. 

3 And Edwin O. Stene has said: "Decision is necessary whenever an organization is 
formed, whenever routine interactivity is deliberately changed, and whenever action 
is called for which has not become routine in character." "An Approach to a Science 
of Administration," American Political Science Review, Vol. XXXIV (December, 1940), 
p. 1130. 

4 it is important to remember that individuals whose work is primarily managerial in 
character often also perform nonmanagerial work. When these individuals make de- 
cisions which affect their own behavior, such decisions are nonmanagerial in their 


decisions affect only their own behavior. The decisions of managers have 
a social import; those of nonmanagers, an individual import. Furthermore, 
decisions are made by other individuals and groups which affect the be- 
havior of managers. These decisions also have a social import. 

In the discussion which follows, primary attention is given to decision- 
making in its social context, since this is the context which is relevant in 
so far as an understanding of the work of managers is concerned. First, the 
nature of decision-making will be analyzed. Then the interindividual and 
intergroup relationships which make it possible for the decisions of one 
to affect the behavior of another will be explored. And, finally, the con- 
clusions will be related to the work of managers, indicating how managers 
affect the behavior of their subordinates and how others affect the behavior 
of managers. 

The Decision-Making Process 

Etymologically, "to decide" means "to cut off." In its present usage it 
suggests the coming to a conclusion. It "presupposes previous consideration 
of a matter causing doubt, wavering debate, or controversy and implies the 
arriving at a more or less logical conclusion that brings doubt, debate, etc., 
to an end." 5 

Decision-making involves a conscious choice or selection of one behavior 
alternative from among a group of two or more behavior alternatives. In 
making a decision, an individual must become aware of relevant behavior 
alternatives, define them, and finally evaluate them as a basis for choice. 
To understand clearly what is involved in the making of a decision, it will 
be helpful carefully to examine each of these steps in the decision-making 

1. Awareness of behavior alternatives. — Before making a decision, an 
individual should become aware of all those behavior alternatives which 
are relevant to the decision to be made. But this is seldom, if ever, possible. 
To a considerable extent he must depend upon his own limited experience 
and information. And memory of these is often sketchy and incomplete. 
He can discover relevant behavior alternatives through investigation, by 
tapping the experience and knowledge of others. But this process is often 
excessively time-consuming and does not guarantee complete coverage of 
all alternatives. For these reasons, it is exceedingly doubtful whether most 
decisions are based upon an awareness of all relevant behavior alternatives. 

2. Definition of behavior alternatives. — Once the individual has become 
aware of certain behavior alternatives, he is next faced with the problem 
of defining each of them. Ideally, this definition involves a determination 
of all the consequences related to each behavior alternative under consider- 
ation; but this ideal can never be achieved for the following reasons: (a) 
The most significant characteristic of the behavior alternatives is that their 

5 "Decide," Webster's Dictionary of Synonyms. 


consequences lie in the future and therefore must be anticipated. But 
whenever the future is anticipated, uncertainty is present. This uncertainty 
is present for two reasons. In the first place, an individual never has the 
knowledge to make it possible for him accurately to determine the nature 
of the consequences which will follow upon the choice of a given behavior 
alternative or their probability of occurring, assuming that all other related 
elements remain constant. And because he does not have knowledge of the 
future, he must use imagination in attaching values to the consequences, 
which values may not obtain when the consequences are actually experi- 
enced. 6 In the second place, all other related elements will not remain 
constant, (b) It is impossible for an individual to be aware of all the con- 
sequences attendant upon any given behavior alternative, (c) The time 
involved in discovering consequences and determining their nature is often 
such that a decision must be made before all the foreseeable relevant pos- 
sibilities can be explored. 7 

3. Evaluation of behavior alternatives. — After an individual has become 
aware of certain behavior alternatives and has considered many of the 
consequences attendant upon each of these alternatives, he must next exer- 
cise a choice between them, i.e., make a decision. What can be said of the 
mental processes which culminate in decision? 

The decisions which an individual makes are basically of two types. 
Some (a very small proportion) of his decisions relate to his system of 
values — they determine his ultimate ends. All other decisions are directly 
or indirectly related to means for the attainment of these ultimate ends. 
The adjective "ultimate" is used advisedly. An individual's behavior is 
guided by innumerable intermediate ends, for each one of which there are 
related means. And the end of one means-end nexus becomes a means to 
a higher-order end. Decisions relating to ultimate ends cannot be judged 
as to their efficacy. They have primarily an ethical content. But such is not 
the case with all other decisions. These are made in terms of related inter- 
mediate ends. In choosing between alternatives, a rational individual will 
attempt to make a selection, within the limits of his knowledge, which will 
maximize results (the degree of attainment of the relevant end) at a given 
cost or which will attain given results at the lowest cost. 8 Thus, he has a 
criterion to guide his choice — the criterion of rationality. 

There are definite limits, however, to rational behavior viewed objec- 
tively (i.e., from an omniscient point of view). These limits stem from the 
individual's lack of knowledge with respect to the existence of behavior 
alternatives and the consequences that will follow from them both from 

6 See Simon, op. cit., p. 81. 

7 In connection with the problem of defining behavior alternatives see Maclver, 
op. cit., p. 297. 

8 The term "cost" is here used in its highly precise form to refer to whatever must be 
given or sacrificed to attain an end (see "Price," Webster's Dictionary of Synonyms). Cf. 
Simon, op. cit., chaps, iv and ix. 


the subjective processes which are necessarily involved in defining alter- 
natives when uncertainty is present, from time limitations, and from the 
psychological difficulties involved in holding alternatives and their con- 
sequences in focus preparatory to making a decision. Because of these fac- 
tors, it is next to impossible to describe the mental processes which 
culminate in decision. 

The necessity for making decisions arises out of the fact that knowledge 
of relevant existing facts is inadequate and that the future is uncertain — 
individuals can never have complete knowledge of all factors underlying 
their choices. If such knowledge were available, decisions would not have 
to be made. If an individual were aware of all the consequences related 
to each of these behavior alternatives, judgment would not have to be 
exercised. One alternative would clearly be superior to all others. Individ- 
ual behavior could be completely rational. In a real sense, that behavior 
would be determined by the consequences related to the superior alter- 
native rather than by a choice between alternatives. The relationship of 
uncertainty to decision-making has been stated by Frank H. Knight as 

. . . With uncertainty absent, man's energies are devoted altogether to doing 
things; it is doubtful whether intelligence itself would exist in such a situation; 
in a world so built that perfect knowledge was theoretically possible, it seems 
likely that all organic readjustments would become mechanical, all organisms 
automata. With uncertainty present, doing things, the actual execution of activity, 
becomes in a real sense a secondary part of life; the primary problem or function 
is deciding what to do and how to do it. . . . 9 

One further point demands attention in connection with this discus- 
sion of the nature of decision-making. What initiates the decision-making 
process? At any given moment of time, there are often many problems 
which might compete for an individual's attention. What determines the 
particular problem with which he will deal? Simon points out that de- 
cision-making is initiated by stimuli, internal or external to the individual, 
which channel his attention in definite directions. Very often these stimuli, 
impinging upon the individual, are accidental and arbitrary in character. 
To the extent that they are, the individual's behavior cannot be rational. 
Also, since the attention-directing stimuli can be external to the individual, 
they can be provided by others who desire to affect the individual's be- 
havior. 10 

The preceding discussion of the nature of decision-making has, for the 
most part, dealt with decision-making in the abstract. It has indicated the 
limits to rational behavior on the part of the relatively isolated individual 
— limits which are greatly reduced when the individual is a member of a 
group, as will be pointed out later. Decision-making actually takes place 

9 Knight, op. cit., p. 268. 

10 See the excellent discussion of these and related points in Simon, op. cit., pp. 84- 


in an environment which significantly affects the decision-making process. 
In the two sections which follow, the various aspects of this environment 
will be explored in considerable detail. 

The Concepts of Authority and Influence 

Introduction. At the beginning of the preceding section it was stated 
that an individual may make decisions which affect his own behavior, or 
he may make them to affect the behavior of another or others. The latter 
case, as was pointed out, is the relevant one in so far as the work of man- 
agers is concerned. This relevancy is present for two reasons. First, in order 
to organize, direct, and control responsible subordinates, managers must 
make decisions which affect the behavior of those subordinates. And, sec- 
ond, managers themselves are in a subordinate position both with respect 
to their own superiors and formal subordinates within an enterprise and 
often with respect to others. Thus managers make decisions affecting the 
behavior of subordinates at the same time that decisions are being made 
which affect their own behavior. The concern here, then, is with social 
processes. These processes are those of authority and influence. In this sec- 
tion the discussion will be devoted to an analysis of these two processes. 

The Nature of Authority. A superior is able directly to affect the be- 
havior of a subordinate if he possesses authority with respect to that sub- 
ordinate. 11 In the preceding article it was stated that authority is commonly 
viewed as orginating at the top of an organizational hierarchy and flowing 
downward therein through the process of delegation. When viewed in this 
way, it was called "formal authority." In reality, effective authority does 
not originate in this manner. 

The real source of the authority possessed by an individual lies in the 
acceptance of its exercise by those who are subject to it. It is the subordi- 
nates of an individual who determine the authority which he may wield. 
Formal authority is, in effect, nominal authority. It becomes real only 
when it is accepted. An individual may possess formal authority, but such 
possession is meaningless unless that authority can be effectively used. 
And it can be so used only if it is accepted by that individual's subordi- 
nates. 12 Thus, to be effective, formal authority must coincide with author- 
ity determined by its acceptance. The latter defines the useful limits of 
the former. 

The concept "authority," then, describes an interpersonal relationship 
in which one individual, the subordinate, accepts a decision made by an- 
other individual, the superior, permitting that decision directly to affect 

11 For purposes of this discussion a "superior" will be defined as one who has effective 
authority over another, and a "subordinate" will be defined as one who is subject to the 
effective authority of another. 

12 The term "accept" is used here, in its various forms, to include acquiescence as 
well as active assent or approval. The import of this will become clear in the discussion 
which follows. 


his behavior. 13 An individual always has an opportunity, with respect to 
a decision made by another directly to affect his behavior, to accept or 
reject that decision. If he accepts it, he thereby grants authority to its 
formulator and, for this matter, places himself in the position of a subordi- 
nate. As a subordinate, the individual permits his behavior directly to be 
affected by the decisions of his superior. If the individual rejects the de- 
cision, he does not grant authority to its formulator. Thus the sphere of 
authority possessed by a superior is defined for him by the sphere of ac- 
ceptance of his subordinates. 

If this line of analysis is to be followed it must be recognized that an in- 
dividual may possess authority in a given situation without having formal 
authority. In other words, the channels through which effective authority 
is exercised do not have to follow the lines of formal organization within 
a given complex. And these channels may extend outside the given com- 

Determinants of the Acceptance of Authority. Since the sphere of au- 
thority possessed by a superior is defined for him by the sphere of accept- 
ance of his subordinates, it is important to inquire into the factors which 
determine this latter sphere. Why do subordinates accept, rather than 
reject, the authority of their superiors? 14 In answering this question, it must 
be remembered that the choice between acceptance or rejection involves 
a decision between two alternatives. This choice is made only after the 
individual has appraised, to the extent possible, the consequences attend- 
ant upon each of these alternatives. 

An individual will accept an exercise of authority if the advantages ac- 
cruing to him from accepting plus the disadvantages accruing to him from 
not accepting exceed the advantages accruing to him from not accepting 

13 Many writers have similarly defined the concept of authority. Some examples of 
these definitions follow: "Authority can thus be defined as a behavioristic concept 
describing a relationship between subject and object in which the subject takes an ac- 
quiescent attitude to behavior prescribed by the object on the basis of power either 
possessed by or delegated to the object" (Abram Kardiner, The Individual and His 
Society [New York: Columbia University Press, 1939], p. 40); . . . the power which operates 
in and through an authority relation is always in some measure the joint creation of the 
bearer and subjects of authority . . . The power of the bearer of authority grows out of 
the acceptance of his direction and guidance as bearer of authority by the subjects of his 
authority, not the other way round" (Kenneth D. Benne, A Conception of Authority 
[New York: Bureau of Publications, Teachers College, Columbia University, 1943], 
pp. 149 f); "Authority is the character of a communication (order) in a formal organiza- 
tion by virtue of which it is accepted by a contributor to or 'member' of the organiza- 
tion as governing the action he contributes; that is, as governing or determining what 
he does or is not to do so far as the organization is concerned" (Barnard, op. cit., p. 
163); 'Authority' may be defined as the power to make decisions which guide the actions 
of another. It is a relationship between two individuals, one 'superior,' the other 'sub- 
ordinate.' The superior frames and transmits decisions with the expectation that they 
will be accepted by the subordinate. The subordinate expects such decisions, and his 
conduct is determined by them" (Simon, op. cit., p. 125). 

14 This question has been specifically, though inadequately, dealt with by Barnard, 
op. cit., pp. 165-71, and by Simon, op. cit., pp. 130-34. 


plus the disadvantages accruing to him from accepting; and, conversely, 
he will not accept an exercise of authority if the latter factors exceed the 
former. Thus a decision to accept or reject a given exercise of authority 
results from a relative evaluation of the consequences — both positive and 
negative — attendant upon the choice of each of the competing behavior 
alternatives. 15 To understand better the factors underlying a decision to 
accept or reject, it will be helpful to consider in more detail the nature of 
the positive and negative consequences — the advantages and disadvantages 
— related to each behavior alternative. 

The possible advantages accruing to an individual from accepting a 
given exercise of authority are many. While the following listing of types 
of advantages is by no means complete, it will serve the end of indicating 
the variety of such advantages: (1) By accepting an exercise of authority, an 
individual is able thereby to contribute to the attainment of an enterprise 
purpose which he recognizes as being good. 10 In the preceding article it 
was pointed out that group activity involves the specialized service-con- 
tributions of individuals which must be coordinated in the attainment of 
an enterprise purpose. Such co-ordination can be achieved only through 
the exercise of authority on the part of the individual who heads the 
group. 17 An awareness of this necessity leads individuals who recognize 
the enterprise purpose as being good to accept authority. (2) By accepting 
an exercise of authority, an individual may thereby attain the approbation 
of his fellow-workers. For most individuals, social acceptance is a strong 
motivating factor. (3) By accepting an exercise of authority, an individual 
may thereby obtain rewards from his superior. These rewards might be 
increased pay, promotion, prestige, opportunity for increased personal 
power, and the like. (4) By accepting an exercise of authority, an individual 
may thereby be acting in accordance with his own moral standards. Some 
individuals believe they ought (that it is right) for them to obey duly con- 
stituted authorities. (5) By accepting an exercise of authority, an individual 
may thereby avoid the necessity of accepting responsibility. Chester I. 
Barnard has commented upon this point as follows: 

15 With respect to a decision to accept an exercise of authority, Roberto Michels has 
this to say: "... submission to authority may result either from a deliberate recogni- 
tion of it as a good or from an acquiescence in it as inevitable, to be endured permanently 
or temporarily with skepticism, indifference or scorn, with fists clenched but in the 
pockets" ("Authority," Encyclopaedia of the Social Sciences, ed. E. R. A. Seligman, Vol. 
II, 1930). 

16 See James D. Mooney and Alan C. Reiley, The Principles of Organization (New 
York: Harper & Bros., 1939), pp. 177 f.; Henry C. Metcalf and L. Urwick (eds.), Dynamic 
Administration: The Collected Papers of Mary Parker Follett (New York: Harper & 
Bros., 1940), p. 59; and L. Urwick, The Elements of Administration (New York: Harper 
& Bros. 1943), pp. 94 f. 

17 ". . . all men engaged in common enterprises, the most mature, rationally auton- 
omous, self-directing persons among others, need commonly accepted rules, norms, or 
principles of order to guide and direct the processes of their cooperation" (Benne, op. 
cit., p. 158). 


... if an instruction is disregarded, an executive's risk of being wrong must be 
accepted, a risk that the individual cannot and usually will not take unless in fact 
his position is at least as good as that of another with respect to correct appraisal 
of the relevant situation. Most persons are disposed to grant authority because 
they dislike the personal responsibility which they otherwise accept, especially 
when they are not in a good position to accept it. . . . 18 

(6) Finally, by accepting an exercise of authority, an individual may there- 
by be responding to the qualities of leadership exhibited by his superior. 19 
In part, this point overlaps some of the preceding ones, but it also includes 
a recognition of the fact that some individuals obey others out of respect 
for their age, superior ability or experience, character, reputation, per- 
sonality, and the like. 

An individual, after considering the advantages to him, may often de- 
cide to accept an exercise of authority. Such a choice would be a free one — 
one not involving compulsion. But he might also decide to accept an 
exercise of authority even though the advantages attendant thereto, taken 
alone, would not be sufficient to induce him to accept. In this case his 
decision would be compelled by another or others; he would simply ac- 
quiesce to authority because of the disadvantages accruing to him from 
not accepting. When an individual is forced by another to do something 
against his will — something he otherwise would not have done — coercion 
is involved. Horace M. Kallen has defined and elaborated upon the concept 
of coercion in these terms: 

Coercion as a trait of human behavior may be said to obtain wherever action 
or thought by one individual or group is compelled or restrained by another. To 
coerce is to exercise some form of physical or moral compulsion. . . . 

. . . When it (coercion) is direct we call it physical; when indirect, moral. Both 
compel or restrain conduct by force majeure . . . 

Most social coercion is indirect; it only threatens force. . . . But all coercions 
involve fear of penalties. Without belief that the coercer can and will impose 
penalties no indirect coercion can be effective. . . . 20 

There are numerous coercive devices the actual use or fear of which is 
often effective in obtaining an acquiescence to authority. Some examples 
of these are social disapprobation, expulsion from a group (ostracism), 
formal disciplinary action, exertion of economic pressure (monopolistic 
and monopsonistic power), torture, imprisonment, taking of a life, etc. 

In order to understand the full implications of coercion, it will be useful 
briefly to digress in order to contrast this concept with the concept of 
sanctions. In every social group there are certain modes of behavior which 
are generally approved and others which are generally disapproved. The 

18 Barnard, op. cit., p. 170. 

19 "... in general leadership implies a following whose behavior is the result of a 
conscious consideration of the leader's personality, of its own interests and of the antic- 
ipated social consequences" (Richard Schmidt, "Leadership," Encyclopaedia of the Social 
Sciences, Vol. IX, 1930). 

20 "Coercion," Encyclopaedia of the Social Sciences, Vol. Ill, 1930. 


reactions of approval and of disapproval represent general formal or in- 
formal social consensus. Now in every group there are some individuals 
who have urges toward nonconformity. Sanctions are devices used to in- 
duce these individuals to conform to the group will. Sanctions may be 
positive or negative in character. Positive sanctions are the social reward 
of conformity, and negative sanctions are the s6cial consequences of non- 
conformity. 21 All negative sanctions are coercive in their effect — they are 
used to impel an individual to conform against his will to group norms of 
behavior. Heads of groups who impose negative sanctions on recalcitrant 
individuals have the support of the vast majority of the group in so doing. 
But heads of groups might also induce conformance to behavior patterns 
which are not generally approved by the group. Here coercion is involved 
but not negative sanctions. Furthermore, one individual with respect to 
another individual or a group or one group with respect to another group 
or an individual outside the group might induce conformance to specified 
behavior patterns through the use of coercion. But here again negative 
sanctions are not involved. Thus coercion includes more than negative 
sanctions. The latter term is applicable only when general group con- 
sensus is involved. When the head of a group uses coercion not based upon 
general group consensus, he is acting in an autocratic or arbitrary manner. 

In raising the question as to whether an individual will accept an exer- 
cise of authority, only the advantages accruing to him from accepting plus 
the disadvantages to him from not accepting have thus far been considered. 
But he will accept only if these factors exceed the advantages accruing to 
him from not accepting plus the disadvantages accruing to him from ac- 
cepting, as has previously been pointed out. These latter factors, however, 
are the same in nature as the former ones. An illustration should suffice to 
make this clear. An employee may be a member of a group most of whose 
members are restricting output in opposition to a wage -incentive plan. 
The implied or explicit order of the employee's boss is that each employee 
should produce the maximum output reasonably possible. Should the em- 
ployee accept this exercise of authority, or should he restrict his output 
(i.e., accept the authority of the work group)? If he accepts the authority 
of his boss, he can earn more, he may get a desired promotion, etc. If he 
does not accept, he may be demoted or fired. On the other hand, if he does 
not accept, he may receive the approbation of his fellow-workers, addi- 
tional status in the group, etc. And if he accepts, he may receive the dis- 
approbation of his fellow-workers or be ostracized from the group. His 
decision to accept or not accept the boss's exercise of authority will be 
based upon an evaluation of these and similar relevant consequences. 

In order to make complete this discussion of the determinants of the 
acceptance of authority, one further point calls for attention. Authority 

21 The discussion of sanctions to this point is based upon R. M. Maclver, Society: 
Its Structure and Changes (Toronto: Macmillan Co. of Canada, Ltd., 1931), pp. 248- 
57; and A. R. Radcliffe-Brown, "Sanctions, Social," Encyclopaedia of the Social Sciences, 
Vol. XIII, 1930. 


is often accepted where conscious processes are not involved. Such accept- 
ance does not entail a conscious choice between acceptance and rejection. 
Rather, it is reflective of unconscious, habitual processes. Authoritative 
pronouncements which are unconsciously accepted lie within what Bar- 
nard has called the "zone of indifference." 22 

Authority Versus Influence. The use of authority is one means of affect- 
ting the behavior of another. The subordinate who accepts an exercise of 
authority does not critically evaluate the behavior alternatives underlying 
the decision of his superior. He accepts the decision and permits it directly 
to affect his behavior. But there is another means by which one individual 
can affect the behavior of another. In this case the latter individual is free 
to make those decisions which directly affect his own behavior. But, since 
he never has complete knowledge with respect to all relevant behavior 
alternatives and to all the consequences related thereto and since the ends 
toward which he directs his behavior are subject to change, it is possible 
for another individual or for others to provide him with information which 
can affect his decisions. This additional information simply adds to or 
changes the relevant factors (means and ends) which he otherwise would 
take into account in arriving at his decision. It might or might not result 
in a decision different from the one that would otherwise be made. In any 
event, the individual, taking the additional information into account, 
freely arrives at his own decision. Such provision of relevant information 
by one person to another (who then takes that information into account 
in arriving at a decision) will be called "influence." 23 The individual who 
exercises influence may offer advice, make suggestions, enter into discus- 
sions, persuade, use propaganda, and the like; but he does not exercise 
authority. 24 In so doing, he indirectly affects the behavior of another. 

Managers make decisions to affect, both directly (through authority) and 
indirectly (through influence), the behavior of their subordinates. And, 
likewise, others make decisions which similarly affect the behavior of man- 
agers. 25 In the two sections to follow the next one, the implications of these 

22 Barnard, op. cit., pp. 167-69. Cf. Simon, op. cit., pp. 12 and 133 £. In my judg- 
ment, Simon misinterprets Barnard's concept of a zone of indifference when he holds it 
to be the equivalent of what he calls the "zone of acceptance." In fact, this latter zone 
is more inclusive and is equivalent to what I have referred to above as the "sphere of 

23 No available term is completely satisfactory to connote the meaning here in- 
tended. The term used seems most closely to conform to that meaning. 

24 Cf. Gordon, op. cit., pp. 150 f., and Simon, op. cit., pp. 126-28. It is recognized 
that the precise dividing line between authority and influence is sometimes difficult to 

25 The social processes here described, involving both authority (including positive 
inducements and coercion) and influence, are those generally encompassed within the 
term "social control." See and compare Joseph S. Roucek (ed.), Social Control (New 
York: D. Van Nostrand Co., Inc., 1947), p. 3; L. L. Bernard, Social Control (New York: 
Macmillian Co., 1939), p. 11; Paul H. Landis, Social Control (Chicago: J. B. Lippincott 
Co. 1939), chap, i; Frederick E. Lumley, Means of Social Control (New York: Century 
Co., 1925), p. 13; John M. Clark, Social Control of Business (2nd ed.; New York: Whittle- 
sey House, 1939), pp. 5-7; Helen Everett, "Control, Social," Encyclopaedia of the Social 
Sciences, Vol. IV, 1930. 


decisions for the performance of the functions of managers will be con- 
sidered in detail. But, first, some additional factors relevant to decision- 
making will be explored. 

Spheres of Discretion 

Constraints. With respect to any given problem involving the necessity 
of coming to a decision, there are typically many desirable behavior alter- 
natives from among which a choice might be made. But, for reasons to be 
discussed below, the individual who must make the decision is not always 
free to chocse from among all these desirable behavior alternatives. Some 
of them may be excluded, by one means or another, from his range of 
choice. It is only from among those alternatives which remain — the avail- 
able alternatives — that a choice may be made. 

In the discussion which follows, it will be said that an individual exer- 
cises discretion with respect to available alternatives, since discretion is the 
power of free decision, of undirected choice. And the available alternatives 
pertinent to any given decision will be considered as falling within a sphere 
of discretion. For each problem calling for decision, there is such a sphere. 
A sphere of discretion has limits within which the exercise of discretion is 
confined. Those factors which set the limits to spheres of discretion — which 
restrict, restrain, or limit the exercise of discretion to available alternatives 
— will be referred to as "constraints." The types of constraints which thus 
define spheres of discretion are numerous and call for more detailed atten- 

1. Authoritative constraints. — A subordinate may have designated for 
him by his superior certain behavior alternatives which cannot be consicf- 
ered by him in the making of a given decision. Thus a salesman might be 
told by his superiors that all sales made of a given item must be made at a 
price falling within a specified range. Within that range the salesman may 
exercise discretion. Of all the constraints, the authoritative is the only one 
that is personal in nature — that is imposed by one or more individuals on 

2. Biological constraints. — When a decision is being made which will 
directly affect the behavior of the individual making the decision or the 
behavior of another, the sphere of discretion of the decision-maker can be 
constrained by certain biological characteristics of himself or of the other 
individual, as the case may be. These characteristics may be permanent in 
nature (a human being cannot fly), or they may be temporary and therefore 
subject to change (a person may not now know how to operate a lathe, but 
he may be able to learn to do so). 

3. Physical constraints. — The constraints of the physical environment 
are ever present. They include such factors as geography, climate, physical 
resources, man-made objects, the chemical elements, as well as physical 
and chemical laws. These factors are typically important in defining 
spheres of discretion. 


4. Technological constraints. — These constraints are determined by the 
state of the arts. For example, in determining how to make a given product, 
the decision-maker is limited in his choice to those alternatives which are 
technologically possible. 26 

5. Economic constraints. — In a freely competitive economic system, 
prices of products and of productive services are impersonally determined 
through the operation of market forces. To the individual or business en- 
terprise in the system, these prices are "givens." The same is true of con- 
sumer wants. These "givens" are constraints with respect to economic 
decisions relating to maximization. Furthermore, the economic resources 
available to an individual or an enterprise are often also important eco- 
nomic constraints in decision-making. 

These types of constraints, where relevant, define spheres of discretion. 
They determine those behavior alternatives which are not available for 
choice. It is from among those alternatives which remain — the available 
alternatives — that a choice is made. Decision-making, then, is judgment 
exercised within constraints. 

Ways in Which the Behavior of One Can Be Directly Affected by the 
Time Decisions of Another. In the preceding section dealing with au- 
thority, it was stated that authority is used by a superior directly to affect 
the behavior of a subordinate. The ways in which a superior can so affect the 
behavior of a subordinate can now be considered. 

1. The superior can impose constraints on a sphere of discretion of a 
subordinate as discussed above, thereby limiting the subordinate's discre- 
tion to the behavior alternatives which remain. 

2. The superior can completely eliminate spheres of discretion from the 
province of a subordinate. In this case the subordinate is permitted no 
discretion with respect to the given problems, and no behavior is expected 
of him with respect to them. 27 

3. The superior can impose a decision on the subordinate to the effect 
that the subordinate act in a particular manner. Here, again, no discretion 
with respect to the problem is permitted to the subordinate, but specified 
behavior (including forbearance) is expected of him. 

Each of these devices which might be used by a superior stems from a 
decision made by him and results in some direct effect upon his subordi- 
nate's behavior. 

26 Of course, he may attempt to extend the state of the arts, but such an extension 
involves a different kind of problem. 

2" This limitation can also be viewed as involving the imposition of constraints. Here 
the alteratives are various problems with respect to which an individual may decide to 
deal. The constraints imposed limit his range of choice in this respect. 



Decision-making is the key to business operations. The job of the busi- 
ness man is to make decisions. The surprising part about business decision- 
making is that very little has been written on the over-all subject. Although 
businesses have been going concerns for a great number of years, the process 
of decision-making was hardly analyzed explicitly until the methods of 
statistical quality control were developed for making rational decisions on 
the course of action to take on processes and the acceptance or rejection 
of a mass-produced product. If decision-making is the key to business oper- 
ations, it would seem that a great deal could be learned by analyzing the 
process and making business people conscious of the decision-making 
process where major decisions are involved. 

Unfortunately, the term "decision-making" may imply a passive ap- 
proach to problems. In an active business, decision-making takes on the 
role of dynamic and aggressive planning, the approach of making decisions 
in advance, the approach of forecasting the conditions that will exist in 
the future and making decisions now so as to optimize performance when 
these conditions arise. It is suicide for a company to accept the philosophy 
of making a decision only when a current dilemma is presented to the 
decision-maker. Rather, the decision-maker must aggressively make de- 
cisions which anticipate conditions and situations in which his company 
will be placed. 

Concept and Frame of Reference All-Important 

With this concept of decision-making in mind, the question arises as to 
what needs of decision-making should be satisfied by improved manage- 
ment techniques. In the past, experienced, intuitive managers have come 
to very remarkable decisions. Some of the best bankers have been remark- 
ably right in knowing whether or not to make a loan. In spite of the good 
performance of common sense, inherent shrewdness, and good business 
judgment, it is still desirable to use every tool available to optimize per- 
formance and minimize loss with the more complex problems in business 

* Robert W. Crawford, "Operations Research and Its Role in Business Decisions," 
Planning for Efficient Production, Manufacturing Series No. 206, (New York: American 
Management Association, 1953), pp. 3-15. 


Probably we all fail to realize how important in the decision process is 
our frame of reference or concept of the problem. If the concept or frame 
of reference is assumed, it may be possible to come to a decision by very 
simple logic. The real decision, then, was made not by the obvious super- 
ficial logic within the frame of reference but rather by the concept or frame 
of reference into which the dilemma was thrown. 

We all know that, in the past, the companies which have used imagi- 
nation, which have been aggressive, which have been willing to take calcu- 
lated risks, which have been able to forecast change, have been the most 
successful ones. Their success has not been due to following logic within 
the customary concepts or frames of reference. Rather, this (success has 
been due to an imaginative concept^of the problem and an imaginative 
frame of reference in which to view it. There is no substitute for imagina- 
tion in setting up the frame of reference within which a decision has to 
be made. 

The Matter of Cost 

How many questions do we fail to raise that ought to be raised, because 
we don't have enough imagination to expand our frame of reference, or 
because our imaginations just aren't stimulated enough? Just think, for 
example, of the costs we incur which aren't shown on accounting state- 
ments. Let us talk about some of these costs. 

At what level of capacity should we plan to operate our plants? When 
we look at our cost sheet we show maximum dollar profits when the plant 
is at 100 per cent of capacity. Yet what about the costs not shown on the 
cost sheet? How much is it costing us in loss of sales because customers 
can't buy more from us? How much does it cost us when the market de- 
mands additional quantities of goods and we have inadequate capacity to 
supply it? If a good customer can't get goods from us, will he then get them 
from a competitor? If he goes to a competitor, will he or will he not become 
a good customer of that competitor — which he was not before? Do we 
know then at what per cent of capacity we should plan to operate to maxi- 
mize long-run profit? 

How much does it cost us if we fail to make a sale because we didn't put 
material in inventory some time back when we had idle capacity to put 
that material in inventory? 

How much does it cost us when a customer receives a shipment which 
he can't use for quality reasons? 

How much does it cost when we lay people off seasonally and later re- 
hire the same workers or others who may have to be trained? 

At what price should our products sell? As high a price as possible, a 
budget would indicate, yet if the demand for our product is very elastic 
and if we have idle capacity, how much are we losing in profits because 
our product is priced at a level above which the added quantity at a lower 


price would more than make up for the margin lost by a reduction in price? 

In addition to these over-all questions, do we optimally calculate how 
big a batch should be or how long a train should be or how many machines 
should be attended by one operator? 

Should not operating equations or models be built following the struc- 
ture of our operations with total cost as the dependent variable and with 
independent variables which are operationally controllable by the manu- 
facturing executive? These equations will also include parameters and 
constants. Should not the accounting system be set up to provide the param- 
eters and constants for these operating equations? In this way, the ac- 
counting system will be operational and will provide data for the operating 
equations which control total costs and which are used for minimizing 
total costs — rather than merely recording total cost. 

Is our accounting system operational? Does it provide control of expen- 
ditures and suggest courses of action rather than merely show the history 
of such expenditures? Does it separate out-of-pocket costs from total costs? 
Does it separate setup costs from production costs involved, once the setup 
has been completed? Most manufacturers would answer this question with 
a "yes," but do they actually do it? 

What is our concept of cost? Is our primary concept a cost sheet or an 
operating statement? Do we conceive of cost as the statistical quality con- 
trol chart of each expense to be subject to continuous and controlled ad- 
justments? Or do we consider a model of an over-all operation, with total 
costs as a dependent function, and then determine the value of the policy 
variable which minimizes total costs? Do we think of costs as over-all 
equations involving a number of variables with decisions to be made so 
as to minimize total costs? 

Contribution of Operations Research 

Operations Research can serve as a management aid which will help us 
with these questions and will contribute to decision-making. The basic 
tool integrating the approaches in Operations Research is the "conceptual 
model for decision-making." Operations Research may be considered as 
emphasizing the construction and use of conceptual models for decision- 

Over all, the basic contribution or novelty of Operations Research lies 
in the two following points. 

1. In regard to its field of application it emphasizes business operations rather 
than business technical matters. Hence it is called "Operations Research" 
rather than "Technical Research." However, it does apply to research opera- 
tions, including research planning (as contrasted with research technical mat- 
ters), as well as to all other operations of a business. 

2. It has a contribution to make in terms of emphasis on ideas. It is a pragmatic 
approach (that is, it emphasizes the role of objectives), with more than normal 
emphasis on the model (rationalism), as contrasted with the technical re- 
search approach with its emphasis on the data (empiricism). If this were its 


only contribution it might be called "pragmatic" research, as contrasted with 
"empirical" research. 1 

Types of Models for Decision-Making 

With the objective of Operations Research established as that of build- 
ing models in order to improve decision-making, a few words ought to be 
said about models and kinds of models. 

A conceptual model is a symbolic representation of the process within 
which or about which the decision is to be made. It is a symbolic concept 
based on the frame of reference in which the problem exists and the con- 
cept of the problem itself. It is a representation of what goes on. 

These conceptual models may be classified by the type of symbolic tools 
used in making them. For example, logical models are models which assert 
logical relationships between logical concepts. Mathematical models are 
models which establish mathematical (functional) relationships between 
quantified variables. Similarly, there are physical, chemical, biological, 
psychological, sociological, economic, and many other types of models. 

Models may use combinations of the tools provided by each area of 
science so that the analyst may utilize all possible tools in obtaining prac- 
tical results. Not only is he free to choose between these models, but he is 
also free to move back and forth between them as convenience may sug- 

Conceptual models may also be classified according to their function. 
Descriptive models are models which describe the process involved in the 
problem to be solved. They show the functional or conceptual relationship 
among the variables. They provide a basis for determining what the facts 
of a problem are. Policy models in general are designed to provide a basis 
for evaluating courses of action from which one or more must be selected 
by the decision-maker. In general, a policy model can be conceived of as 
an equation in which the policy variables are independent variables and 
the efficiency of a decision is the dependent variable. It enables one to 
maximize or minimize the dependent variable, the efficiency variable. The 
efficiency variable which measures the results caused by the policy variable 
is the dependent variable, the quantity to be maximized or minimized. 

Again, conceptual models may be classified as regards the certainty of 
the values of the variables of the models. Certainty models are models 
which involve only variables with exact or certain values. Probability 

1 The major schools of thought on the method of problem-solving in the past have 
been classified as (1) empiricists, (2) rationalists, and (3) pragmatists. The empiricists 
emphasize the fundamental nature of data to the exclusion of other aspects of problem- 
solving. The rationalists emphasize the power of reason or, in Operations Research 
terms, the model. The pragmatists combine these approaches and emphasize the 
practical consequences of any inference. In the past, technical research has emphasized 
the empirical approach which emphasizes data. The Case Institute Operations Research 
Group feels that business has not emphasized enough the use of the rationalistic ap- 
proach or the model, and it recommends the pragmatic emphasis on goal (orientation 
of the model). 


models are those which involve at least some variables whose values have 
a probability distribution. In probability models, the notion of "mathe- 
matical expectation" is introduced so as to make what looks like an un- 
controllable variable become a variable with an expected value based on 

Conceptual models may also be classified by the type of decisions to be 
made. These are single-decision models, multiple sequential decision mod- 
els with countermeasures. A countermeasure is a decision made by those 
affected by an earlier decision so as to affect the efficiency of that earlier 
decision. Because the model is to be considered in relation to decision- 
making, it will be discussed in this paper as being based on the type of 
decision to be made. First, though, we shall talk about steps in model- 

Steps in Model-Building 

Model-building, like decision-making, is a subject on which there has 
been very little written. Its concept is quite simple, although its applica- 
tion may be quite subtle. All of us have had experience in it. Any of us 
who took elementary geometry and worked on application problems have 
had a dose of model-building. In the present Operations Research applica- 
tions, it consists usually of working out equations showing costs and/or 
profits and then using calculus to maximize profits or minimize costs. In 
the sense that almost every engineer has had a certain amount of calculus, 
he is familiar with and can appreciate and use a tool like this which will 
allow him to relate variables and calculate maximum and minimum values. 
Very complicated problems in maximization can, however, arise. When 
one is actually presented with a problem which is to be attached by build- 
ing a model, the following steps are suggested for setting up an Operations 
Research model. 

1 . Identify the criterion in terms of which the possible decisions can be evalu- 
ated. In other words, define the dependent variable and its units of measure — 
i.e., profits or cost in dollars per year. 

2. Since the answer may be discontinuous and non-homogeneous, break down 
the problem and answer into homogeneous subsections. 

3. List the independent variables in the order of their believed effect on the 
dependent variable. Eliminate from consideration unimportant variables. 

4. List variables in the order of their independence of each other, the most 
independent first, the most interrelated last. 

5. Group interrelated variables which cannot be segregated and consider them 
as a group. 

6. Consider then the most important independent variables or independent 
groups of dependent variables. 

7. If feasible, graph the entire problem, making separate graphs for each 
homogeneous subsection. 

8. Label each line on the drawing with its equation. Label the points of dis- 
continuity between homogeneous subsections. 

9. Set up an over-all equation, putting on the left the dependent variables which 
you want to determine and on the right the independent variables you want 


to measure. This procedure will allow you to construct an over-all equation 
which is the model. 

Both descriptive models and policy models can be built by following 
these general steps. 

In model-building, all judgment and experience available must be used 
and built into the model. Questions of choice of problems, assessment of 
order of importance of variables, and the character of the relationships in- 
volved cannot be divorced from judgment and experience. Such judgment 
and experience must be supplied either by the executive or the analyst or 
by both together. 

It must be realized that the work of setting up models and of arriving 
at practical conclusions may be a very difficult and lengthy job. In some 
difficult cases ingenious improvisations, rather than the model desired, may 
be made to get interim results. 

Single-Decision Policy Models 

Now let us consider models classified by the type of decision to be made. 
First we shall consider single-decision models, and later we shall consider 
multiple sequential decision models. In all cases let us talk about policy 
models. Policy models are used for making a policy decision, and they 
are specifically built for decision-making. 

Making a decision is similar to coming to an inference on the proper 
course of action. There is a common pattern in methods of inference in 
all fields. The diverse terminology used in each field can be converted into 
common terminology and symbols applicable in any field. The single- 
decision policy model has three steps or parts. The first part is to determine 
the objectives (O). The second part is to set forth the alternate courses of 
action (C). And the third part consists of determining the efficiency (E) 
of each course of action. The terminology in each field, classified as to 
whether it is an objective, a course of action, or an efficiency measure, is 
shown in the table entitled "Inference Cycle." This inference cycle, once 
converted into symbols, then becomes the single-decision policy model. 
This model in symbolic form may be found on page 10. 

Multiple Sequential Decision Policy Models without 

Contrasted with the single-decision policy model shown in the prior sec- 
tion, decisions in a large number of situations must be made continually, 
and multiple sequential decision models are required for these. Multiple 
sequential decision models can be simplified by breaking them down into 
models where countermeasures are not taken and models where counter- 
measures can be taken. If one is continually adjusting a production process 
based on its performance shown on a quality control chart, this is a mul- 
tiple sequential decision model in which countermeasures are not involved. 


It is a cybernetic, or continuous, sequential use of the single-decision model. 
A cybernetic model is one which allows for continuous adjustment in op- 
eration based on information as to the effects of preceding decisions. If 
one is making a pricing decision, and subsequently a competitor may take 
a countermeasure by adjusting his prices, this is a type of multiple-decision 
model which involves countermeasures. The latter will be discussed in the 
next section. 

The single-decision policy model may be used repeatedly or cyberneti- 
cally, and when used this way it becomes the multiple sequential decision 
policy model without countermeasures. The table entitled "Inference 
Cycle" indicates whether the model is usually used as a single decision or 
a multiple cybernetic decision model in each field. A very strong plea can 
be made that in business all possible decisions or inferences should be 
cybernetic. Business is dynamic. It is constantly changing. The only way 
to make sure that decisions or inferences follow the dynamic character of 
business is that they be cybernetic, be self-adjusting, and be changing as 
the original data themselves change. 

It is also possible to consider a multiple sequential decision policy model 
a modification of the "theory of games" model described in the next sec- 
tion. In this case, the game is played against inanimate objects or against 
nature, rather than against an animate individual who may make active 
counterdecisions or take countermeasures. 

Multiple Sequential Decision Policy Models with Countermeasures 

The game model played against personal opponents allows the par- 
ticipants to make decisions against the original individual and is not re- 
stricted to inanimate objects acting in accordance with physical laws. Be- 
cause of the introduction of the personal element, the model can then be 
conceived of as a model for rational behavior. The theory, according to 
the book, fulfills for economic and social problems the same function which 
geometrico-mathematical models have successfully performed in the physi- 
cal sciences. It provides a model for the economic side of social organization 
or a model for business competition. This is made possible by the inclu- 
sion of a person's countermeasures. 

Applied to business competition, it is a model for the decisions in busi- 
ness which are made relative to competitors. Even without the mathematics 
involved, it stresses the over-all approach of spelling out exactly each alter- 
nate course of action an individual company can take and all the counter- 
moves that each competitor may make to each course of action. 

Much of the theory of games bases decisions on the "minimax" prin- 
ciple. This means that the correct solution for a company is to pick the 
course of action which will result in a stable situation and which will 
have the highest value to the original company, assuming the competitor 
to select those measures which are most effective from his point of view. 
The company in this way minimizes its maximum loss. The concept is 

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simple, but mathematical handling is complex. When one has N competi- 
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of alternatives the fact that players may form coalitions and then compete 
as teams, the model gets really complicated. 

Types of Application to Business 

Model-building had been going on for a long time before the name "Op- 
erations Research" was coined. We understand that production scheduling 
was being done in the 1920's by means of differential equations. Some of 
the types of models which have been applied to business decisions in the 
past follow. 

The field of maintenance has received attention in mathematical mod- 
els. A maintenance model is set up to determine the time at which an item 
which wears out gradually should be replaced to minimize total main- 
tenance costs and costs due to breakdowns. This model is applicable where 
it costs considerably more to have equipment fail in service than it costs 
to have equipment fail when deliberately replaced, according to some oper- 
ationally verified maintenance plan. In a sense, this maintenance model 
is the mathematical conceptualization of preventative maintenance. 

In one single-decision policy maintenance model, the objective (O) is 
to minimize total costs. The efficiency variable (E) is total maintenance 
costs, and the course of action (C) is the policy variable, the time at which 
to replace the parts. Total costs are: 

1. Variable cost of replacing parts failing in use. 

2. Variable cost of replacing parts during scheduled maintenance. 

3. Cost of the parts wasted when replaced during maintenance. 

4. Fixed costs. 

When the first derivative of this equation is set equal to O to minimize 
total costs, the time at which to replace parts then becomes a function of: 

1. The pattern of failure of the part. 

2. Variable cost of replacing one part failing in use. 

3. Variable cost of replacing one part during regular maintenance. 

4. Cost of the part per unit time wasted. 

One of the first fields of mathematical models to be developed has been 
that of inventory analysis. Models may be set up either for raw-materials 
inventories for finished parts or for finished-goods inventories. They can 
be used to determine the quantity of raw materials to be ordered or to 
determine whether finished-goods inventories should be built up to meet 
anticipated sales demands. By slight generalization this model can be made 
to include problems of production scheduling. 

In one single-decision policy inventory model the objective (O) is to 
minimize total costs. The efficiency variable (E) is total costs, and the 
course of action (C) is the single policy variable, the quantity to be ordered 
at one time in units. Total costs in this model are: 


1. Variable ordering costs. 

2. Variable storage costs. 

3. Fixed costs. 

4. Less quantity discounts. 

When the first derivative is set equal to O to minimize total costs, the 
amount to be ordered in units is a function of: 

1. Cost of placing one order. 

2. Number of units used per year. 

3. Variable storage costs. 

4. Quantity discounts. 

The mathematical technique of linear programing, as well as the use 
of differential equations, has been used for calculating an optimum pro- 
duction schedule in a plant to maximize the profits in dollars. The tech- 
nique of linear programing is too complex and involved to be covered 
here. However, the method used for solving this type of problem is to set 
up a series of linear equalities or inequalities using common variables and 
to solve for the variables by the methods of matrix algebra so as to opti- 
mize the policy function which is a linear function of the unknowns. 

In the production-scheduling linear-programing model the objective (O) 
is maximum profits. The efficiency variable (E) is total profits, and the 
courses of action (C), the policy variable, are the number of units to be 
manufactured of each type of product. In the model there may be n prod- 
ucts to be made on m machines, so that large matrices may be involved. 
There are roughly three types of equations: 

1. Profits — number of units to be manufactured times unit profits. 

2. Capacity of the machine ) number of units to be manufactured times unit 

3. Maximum sales potential ) number of units to be manufactured. 

It is possible to use models in research design. Types employed include 
descriptive models of the process on which research is being conducted, 
policy models of the action to be recommended, and policy models deter- 
mining the amount of research experimentation itself that is required. 

In one single-decision policy model in this field covering the number of 
tests to run to determine a population mean, the objective (O) is minimum 
costs. The efficiency variable (E) is total costs. The course of action (C) is 
the number of samples to be tested. Total costs in this model are: 

1. Costs of testing. 

2. Costs of error in the value of the mean times the probability of that error. 

When the first derivative is set equal to O to minimize total costs, the 
number of samples to be tested then becomes a function of: 

1. Cost of making a single test. 

2. Cost of error in the value of the mean. 

3. Standard deviation of the mean. 


Models for Investment 

Plant investment models also fit into the over-all field of Operations Re- 
search. In essence, an equation for a decision on an investment is a single- 
decision policy model. Investment models were included on the table en- 
titled "Inference Cycle." In inference-cycle terms the objective (O) is to 
produce the product of the manufacturing company at minimum cost. The 
courses of action (C) to be evaluated are: the use of the present machine if 
a replacement is involved, the use of a new machine of one particular type, 
or the use of alternate machines of different types. 

These courses of action are then to be evaluated by the efficiency variable 
(£). The efficiency variable differs depending upon the approach or ac- 
counting practice of the company or industry. In the annual-cost formulas, 
the efficiency variable consists of the annual cost required for each invest- 
ment or course of action in dollars per year. In the pay-out period formula 
the efficiency variable is the number of years required for each investment 
or each course or action to pay out. In the return-on-investment formula 
the efficiency variable is the return on investment for each investment or 
course of action. In the present-worth formula, which is not used a great 
deal by manufacturers, the efficiency variable is the present worth of each 
course of action. 

Even though each single investment decision involves a one-time use of 
the general policy model for a single decision, yet the process should be 
cybernetic and should be used repeatedly. There should be a continual 
evaluation of investment to see whether or not conditions have changed to 
justify the disposal of purchase of machinery and equipment. 

Sample equations for each one of these methods of evaluating invest- 
ment expenditure follow. The variables involved are: 

C = Annual cost of an investment, 
R = Return on investment, 
Y = Pay-out in years, 
P = Investment in dollars, 
L = Net salvage value of investment at n years, 
n = Estimated life of investment in years, 
i = Annual interest rate, 
E = Annual expenditures, including all cost items except depreciation 

and interest, 
5 = Annual sales. 

Annual-cost equation: 

Return-on-investment equation: 

R = S ~ C 

Pay-out-in-years equation: 

y = 




In the above examples straight line depreciation was assumed. Other de- 
preciation policies could be used to replace straight line depreciation as 

Summary and Conclusions 

We have shown in this paper that business has a number of problems on 
which decisions are made and for which it would be very valuable if more 
adequate tools were available. Operations Research is trying to fill this 
need by developing the conceptual model for decision-making. A few ex- 
amples of how far the development of conceptual models has proceeded in 
various fields have been given. 

It would seem that the ultimate in this field would be to have a complete 
model of any business which would include all parameters, all variables, 
all solutions. Incorporated in it would be all probabilities. It would be 
used at all levels in the business, at any level where decisions were made 
which could be improved by this tool. The accounting system would be 
set up to provide the necessary data for the model. 

Of course, this treatment has not been completed and is just beginning 
to be worked out, and many techniques must be developed for application 
to particular cases so as to yield practical results: 

While this ultimate model is not possible now, one step toward it would 
be to classify the large number of problems that exist in a company and 
work out general models for each type of problem in terms of parameters 
and variables. These general problems and general models could then be 
made specific by setting values for the parameters for each particular set 
of conditions. 

Even if these tools may take years to develop, major improvements both 
in judgment and in Operations Research may well come in the near future 
simply by sharpening the questions and problems which judgment is re- 
quired to face. Thus, even if information only on relevant orders of magni- 
tude is supplied, it may turn out to be the case that much of what arouses 
current concern in principle is relatively unimportant in magnitude. 

Operations Research has given us some new tools. More power to it in its 
endeavor to develop even more tools that will improve business decision- 


We should like to acknowledge, as background for this interpretation of 
Operations Research, the pioneering that was done by the Case Institute 
of Technology Operations Research Short Course in June, 1952. We should 
particularly like to cite the following persons on the faculty of this course: 
Dr. Russell Ackoff, Case Institute of Technology; Dr. C. West Churchman, 
Case Institute of Technology; Dr. S. B. Littauer, Columbia University; 
Dr. W. W. Cooper and Dr. A. Charnes, Carnegie Institute of Technology. 


The over-all concept and guidance of Operations Research is attributed 
to Dr. Churchman and Dr. Ackoff. The conceptual policy model for single 
decisions is attributed to Dr. Ackoff. The ideas and concepts for the Cycle 
of Inference are those of Dr. Littauer based on the original ideas of statisti- 
cal control by Shewhart. Dr. Cooper's and Dr. Charnes' linear programing 
has been very stimulating in demonstrating the potential value of Opera- 
tions Research in production planning. 

The "Models for Investment" section was based on the firsthand knowl- 
edge of F. A. Reese, Assistant Division Engineer, Plastics Division, Mon- 
santo Chemical Company, Springfield, Massachusetts. 

We wish to acknowledge contributions made by the above and by R. K. 
Mueller, General Manager, Plastics Division, Monsanto Chemical Com- 
pany, Springfield Massachusetts, based on his comments on a first draft 
of this paper. 

Creative Thinking 


The creative thinking process is in wide use today for purposes of stimu- 
lating scientific research in both the physical sciences and the social sci- 
ences. It is used also to help executives and employees discover better ways 
to achieve desired results. Individuals can use it to solve personal problems. 
There is strong evidence that anyone can increase his creativity if he has 
the desire and patience to master the creative process. The success of 
numerous creative thinking training programs for executives supplies the 

Operative Definition 

Creative thinking is the process of bringing a problem before one's mind 
clearly as by imagining, visualizing, supposing, musing, contemplating, or 
the like, and then originating or inventing an idea, concept, realization, or 
picture along new or unconventional lines. It involves study and reflection 
rather than action. 

Main Levels of Thinking 

Three main levels of thinking have been advanced by Professor B. H. 
Jarman of George Washington University. They are the habit level, the 
problem-solving level, and the creative or insight level. 1 

* John F. Mee, "The Creative Thinking Process," Indiana Business Review, Vol. 
XXXI, No. 2 (February, 1956), pp. 3-7. 

1 B. H. Jarman, "Can Executives Be Taught to Think," Advanced Management 
January, 1954, p. 6. 


The habit level of thinking results from either the conditioned response 
or trial and error methods. It is routine and unimaginative. Those who 
work at the habit level are following "beaten paths for beaten men." They 
work from plans of other men's minds by performing standard operating 
procedures or methods. They depend upon memory of techniques and 
formulae. The well-known poem by Sam W. Foss, "The Calf-Path," de- 
scribes the thinking of such individuals. 

Thinking on the problem-solving level is logical because it proceeds 
from facts which are either given or obtained. The scientific method of 
attack may be used at this level. The well-known "case study" approach to 
education, in which certain business situations are simulated, is used to 
provoke problem-solving thinking. A problem is discovered. Analysis and 
evaluation of the facts are made. Then a decision is made to resolve the 

Thinking on the creative or insight level may not be logical because it 
is done when only some facts are known and others are missing. Creative 
thinking occurs when sound conclusions or judgments are reached when 
some important facts or data are either unknown or withheld. Creative 
thinking results from a partial knowledge of a situation. Combinations 
and eliminations of associated facts begin to clarify the imagery or idea 
that will lead to a solution. Insight then provides the imagination with 
the searched-for concept or idea. The imagination is required to set up a 
number of hypotheses that can be checked, compared, and evaluated, so 
that a superior solution can be developed from the best elements of the 
competing hypotheses. Examples of such insight were Trudeau's flash of 
inspiration that tuberculosis could be cured if a victim's environment could 
be controlled; and Finaly's insight that yellow fever was associated with 

There is a close relationship between these levels of thinking and the 
levels of management practice as described by Barnard. 2 

Levels of Management Practice Levels of Thinking 

1. Job know-how 1. Routine or habit 

2. Specific organization practice 2. Problem-solving 

3. Principles and fundamentals 3. Creative 

Steps in the Creative Thinking Process 

The creative thinking process has been described in the literature of the 
field by numerous authorities and practitioners. The presentation here 
represents a selection and combination of the best elements of all these 
methods for creative thinking. 

When 'Omer smote 'is bloomin' lyre, 
He'd 'eard men sing by land an' sea; 
An' what 'e thought 'e might require, 
'E went an' took — the same as me! 

— Kipling, "When 'Omer Smote 'is Bloomin' Lyre" 

2 Herbert A. Simon, Administrative Behavior, Foreword by Chester I. Barnard (New 
York: Macmillan Co., 1948), pp. x-xii. 


Attitude and Concentration. There should be established in one's mind 
a positive attitude toward complete freedom of ideas even though they may 
seem impractical or unorthodox at first. Attempts to criticize or evaluate 
should be held in abeyance. Concentration for periods of about 30 min- 
utes' duration should be practiced each day. To become proficient in the 
creative thinking process, it is essential that one develop the desire and the 
will to concentrate on a problem for a period of time without interrupting 
by getting a drink, turning on the radio or television, making a phone call, 
or looking out the window. A positive attitude and the ability to concen- 
trate are basic essentials for a climate friendly to creative thinking. 

Selecting or Defining a Problem. First, determine your purpose. Ignore 
ideas until you have determined why you want or need ideas. Find out 
what needs to be done or what you want to accomplish. You will not get 
started on the creative process by looking around for ideas that are new. 
To try to be creative by random search for original ideas will result only 
in futile frustration. C. F. Kettering, a very creative person, once stated 
that "All research is simply finding out what is wrong with something, and 
then fixing it." Therefore, start by selecting a problem in your area, and 
make sure that you know what the problem is. Define the problem clearly; 
then write it down as a "fix point" for the start of the creative process. It is 
suggested that "limiting factors" be listed and a "difficulty inventory" and 
a "difficulty analysis" be used in getting a "fix point" on the problem at 
the start of the creative process. 

C. F. Kettering set out to develop the electric self-starter for motors, and 
he did it. In a demonstration, objection was made to his invention because 
he used more current through the wires than established formulae allowed. 
Kettering stated that his problem was to start an automobile. He was not 
interested in formulae. He had defined and picked his problem; then he 
stayed with it until a solution was reached. Previous failures of others to 
develop the electric starter did not bother him. He considered other fail- 
ures an opportunity for him. 

In selecting a problem, remember that the positive attitude and concen- 
tration climate are important. Regardless of the difficulty or the apparent 
impracticability of the problem, a solution can be reached through the 
creative process. Have the courage to depart from traditional formulae or 
thinking. Remember the plight of the bumblebee: "According to theory of 
aerodynamics and as may be readily demonstrated through laboratory tests 
and wind tunnel experiments, the bumblebee is unable to fly. This is be- 
cause the size, weight, and shape of his body, in relation to the total wing 
spread, makes flying impossible. But — the bumblebee, being ignorant of 
these profound truths, goes ahead and flies anyway — and manages to make 
a little honey every day!" The world of business is filled with opportunity 
for those who will and can select problems that impede economic or tech- 
nological progress and solve them through the process of creative thinking. 

Exploration arid Preparation. New or unconventional ideas are not 


created by wishing. They must be laboriously and carefully created from 
raw materials. The raw materials may be called knowledge. In the crea- 
tive thinking process, ideas are originated by associations of existing ideas 
and factual information. New combinations and eliminations are brought 
about. Facts are matched against facts. 

The exploration and preparation step in the creative process involves 
gathering, refining, and organizing all of the obtainable raw materials 
and knowledge that bear upon the problem selected. The purpose is to 
enable one to soak up information that will be grist for the mind later. 
One is not concerned with new ideas in this step — they come later. Raw 
materials and knowledge may be obtained from journals, books, magazines, 
research reports, associations with informed people, personal observations, 
lectures and experience. In the exploration and preparation step, one 
should search for knowledge over as broad a field as possible. Every effort 
should be made to determine what underlies the facts and whether or not 
fundamentals or principles are apparent. For best results the raw materials 
or knowledge gathered should be written down for proper organization 
and refinement. 

The exploration and preparation work is probably the most difficult of 
all of the steps in the creative thinking process because it involves a great 
amount of painstaking mental and physical effort. There are no short cuts. 
One must force oneself to gather, refine, and organize raw material and 
knowledge pertaining to the problem until every source is exhausted. This 
requires great self-discipline and tenacity of purpose. The lazy or the in- 
dolent will fail in this step. One must continue the exploration and prepa- 
ration step until no new or additional raw materials and knowledge are 
obtainable. Remember, in creative thinking some facts are known and 
some are missing. Therefore, all possible facts and information must be 
obtained. Furthermore, the facts should be classified on some logical basis 
for later analysis and evaluation. Otherwise, the gaps in the later mental 
configuration may be too great for insight to bridge. 

Hypotheses, Brainstorming, or Wild Thinking. This step involves the 
application of all existing ideas or knowledge to the solution of the prob- 
lem in all possible combinations. Pareto's concept of "instinct of combina- 
tions" in Mind and Society describes the method for this step. 3 It is during 
this step of the creative thinking process that one gives his mind full free- 
dom to range for a new idea to resolve the problem. 

All possible relationships of existing raw materials and knowledge are 
combined. Some will be very wild and impractical; but the more, because 
of the increased probability that one will hit on the solution. All should 
be written down and preserved for later reference. Charles S. Whiting of 
McCann-Erickson, Inc., has described some operational techniques for this 

3 Vilfredo Pareto, Mind and Society (New York: Harcourt, Brace & Co., 1935). 


step: the analytical technique, the forced relationship technique, and the 
free association technique. 4 

The analytical technique involves the use of a pattern for establishing 
all possible relationships of knowledge to a problem. Alex F. Osborn's 
check list illustrates this technique by asking the following questions. Let's 
take an existing product or service as an example. (1) Can it be put to other 
uses? (2) Can it be adapted? (3) Can it be modified? (4) Can it be magnified? 
(5) Can it be minified? (6) Can it be substituted for others? (7) Can it be 
rearranged? (8) Can it be reversed? (9) Can it be combined with some- 
thing? 5 This technique is well known for methods work and work simpli- 

The forced relationship technique involves making a list of objects or 
ideas which may have some possible relationship, and then considering 
each object or idea in relation to every other one on the list. An example 
of this technique in action would be forcing the combination of all chemi- 
cal elements in all possible relationships in an attempt to find a cure for 
cancer or the common cold. Obviously this is a laborious and time-consum- 
ing effort, although the use of electronic machines can be helpful. 

The free association technique involves wild thinking or brainstorming. 
This technique is basd on values which come from allowing any idea which 
comes to mind on a problem to be recorded. No attempt is made to evaluate 
ideas until all possible ideas have been expressed. A positive attitude and 
a receptive climate are essential for this technique because the purpose is 
to write down all possible ideas generated on a problem regardless of how 
silly or impractical they at first seem to be. 

If a brainstorming session is to be held, the exploration or preparation 
step is minimized because the raw materials or knowledge obtainable exist 
in the experience and minds of the members of the group that participates. 
The group is presented with a problem, and everyone is encouraged to 
contribute ideas. For example, in the General Motors AC Spark Plug 
Division, one brainstorming session produced over 100 ideas on how to 
finish off a casting. The Ethyl Corporation got 71 ideas in less than an 
hour on a new booklet for employee benefit plans. 

The digestion of the raw materials and knowledge obtained in explora- 
tion and preparation should continue by wild thinking on relationships, 
the establishment of possible hypotheses, brainstorming, and the like until 
a feeling of frustration appears. When all possible relationships have been 
combined and mental fatigue occurs, it is time for diversion — the next step. 
When Sherlock Holmes seemingly ceased work on a case and dragged his 
friend, Dr. Watson, to a concert or played his violin, he was actually mov- 
ing up a step in his brilliant creative thinking. 

4 Whiting, "Operational Techniques of Creative Thinking," Advanced Management, 
XX, No. 10 (October, 1955), p. 25. 

5 Adapted from Alex F. Osborn, Applied Imagination (New York: Charles Scribner's 
Sons, 1953), p. 284. 


Incubation or Gestation. This step involves unconscious cerebration. 
One can contribute little to this step directly. One must either arrange to 
think about other subjects or problems, or even rest from any form of 
conscious thought by seeking recreation or entertainment. When those 
responsible for assignments requiring creative thinking indulge in reading 
wild west or detective stories, or listen to jazz music, don't malign or be- 
little them. They are probably engaging in this step of the creative process. 
Likewise, a hobby is a valuable asset to a creative thinker. During this step 
of incubation or gestation, one's mind will continue to operate on the 
problem unconsciously. However, it is important to prevent emotional or 
mental blocks by some form of diversion which will result in one's not 
thinking about the problem or associated ideas. This is important because 
the next step should result in illumination or insight which brings to mind 
the idea sought to solve the problem. 

Illumination. This step often occurs when least expected. The idea will 
appear when one is eating, bathing, relaxing, driving, or engaging in some 
similar activity. If the previous steps of exploration and preparation, diges- 
tion of relationships, and incubation or gestation have been accomplished 
properly, the new idea will be brought to mind. However, other ideas will 
follow in quick order. Many fail in the creative thinking process on this 
step because ideas come to mind faster than one's memory can absorb or 
retain them. Therefore, it is important that some means of writing down 
the ideas as they occur be devised. Otherwise, they will be lost and the 
previous work in the creative process nullified. 

Verification and Application. The final step in the creative process of 
thinking is that of verifying, modifying, or applying the idea toward the 
solution of the problem selected and defined. However, the same freedom 
of thinking and imagination should be used in verifying or applying the 
new idea brought to mind as in the other steps of the creative process. 
This step is essential if one is to get his ideas accepted and used. 

The creative thinking process is based upon three essential elements: 
knowledge, proficiency, and attitude. Knowledge supplies the grist for the 
mental process. Proficiency in all steps of the creative thinking process is 
vital for success in using it. There must be a positive attitude and a recep- 
tive climate for using the process. 

They copied all they could follow, 
but they couldn't copy my mind, 
And I left 'em sweating and stealing 
a year and a half behind. 

— Kipling, "The Mary Gloster" 


Game Theory 




Game theory is a method for the study of decision-making in situations 
of conflict. It deals with problems in which the individual decision-maker 
is not in complete control of the factors influencing the outcome. A gen- 
eral whose forces face the enemy, an industrialist whose products must 
compete with those of another industrialist, a player in a poker game, 
duelists, politicians fighting for a nomination, bandits, and bridge players 
are all involved in struggles which we may classify as game situations. 

The essence of a game problem is that it involves individuals with differ- 
ent goals or objectives whose fates are interlocked. There are many ex- 
amples of decision-making where this is not so. An architect who has been 
allotted a specified sum of money in order to carry out a given building 
program or an engineer engaged in redesigning an industrial process in 
order to cut cost of production are not involved in a game situation. The 
engineer and architect face direct minimization or maximization problems 
in which they are in control of the relevant variables and do not have to 
contend with anti-engineers or anti-architects who try to destroy their 
work. The architect may try to maximize certain features of the quality 
and quantity of building that he can get done for the amount of money at 
his disposal. The engineer tries to minimize costs for the output of goods 
required. There may be forces which they do not control, such as the 
weather; but in most cases some physical law of prediction can be found 
for estimating the effect of outside influences. 

Although it may appear that the Weather wants to rain every time we 
go on a picnic; unless our pessimism and religion are such, it is not always 
reasonable to assume that the Weather is a human or super-human agency 
whose desires are consciously opposed to ours. On the battlefield we may 
assume that the opposing general is consciously trying to thwart our pur- 
poses. The rival firm in business may be actively engaged in taking our 
customers away from us. In the first case we do not have a game situation; 
in the other cases we do. 

The problem of game theory is more difficult than that of simple maxi- 

* Martin Shubik, Princeton University. The work for this paper was done under 
Office of Naval Research Contract No. N6onr. 27009. 


mization. The individual has to work out how to achieve as much as pos- 
sible, taking into account that there are others whose goals are different 
and whose actions have an effect on all. A decision-maker in a game faces 
a cross-purposes maximization problem. He must plan for an optimal re- 
turn, taking into account the possible actions of his opponents. 


The elements which describe a poker game are the players, money, a 
pack of cards, a set of rules describing how the games are played, which 
hands win in any situation that can arise, and what information conditions 
there are at any stage of the game. The elements which describe the situa- 
tion of two firms in an advertising campaign are the two sets of individuals 
in control of the decisions of both firms, the amounts of money available, 
the information state, the market forecasts of the effect of different types 
of advertising, and the various laws and physical conditions which deline- 
ate which actions are legally or physically possible. The situation in which 
two opposing field commanders may find themselves can be described in 
terms of the number of men at their disposal, the amount of equipment, 
their information and intelligence services; the terrain of the battlefield 
and weather conditions and their valuation of the importance of various 

All the above examples obviously have a common core. A game is de- 
scribed in terms of the players, or individual decision-makers, the rules of 
the game, the payoffs or outcomes of the game, the valuations that the 
players assign to various payoffs, the variables that each player controls, 
and the information conditions that exist during the game. 

These elements, common to all situations of conflict, are the building 
blocks of game theory. They play the same role in this theory as do particles 
and forces in a theory of mechanics. The players and the rules of the game 
provide a description of the physical situation and the attempt of the 
players to maximize or to achieve some individual goal provides the moti- 
vation or force. 

A player in a game is an autonomous decision-making unit. A player is 
not necessarily one person; it may be a group of individuals acting in an 
organization, a firm, or an army. The feature that distinguishes a player is 
that it has an objective in the game and operates under its own orders in 
an attempt to obtain its objective. Each player is in control of some set of 
resources. In poker these resources are cards and money; in business cor- 
porations they are various assets; in war, men, armaments, and resources. 
These resources, together with the rules of the game, describing how they 
can be utilized, enable us to work out every alternative that is available to 
a player. In chess we start with a set of pieces placed on the board in a 
certain manner; the rules tell us how each piece can be moved. Given that 
information, we can work out every possible first move that is feasible in a 


chess game. As we know the initial distribution of the enemy's men and the 
rules concerning their movement, we can also work out every alternative 
that he can choose for his first move. In fact, it is theoretically possible to 
work out the whole game of chess without ever playing it because we could 
calculate every possible way of playing the game beforehand. Practically 
the computation problem is too immense to carry out, but we can imagine a 
game of chess being played in which each player goes up to the referee, 
hands him a book containing his complete strategy for the game, and then 
leaves. The referee then works out the game according to these instructions. 
A strategy for a chess game is a complete set of instructions which states how 
a player will make every move until the end of the game, taking into ac- 
count all information concerning the enemy's moves. A strategy in war or 
in business is the same. It is a general plan of action containing instructions 
as to what to do in every contingency. Thus, the commanding general may 
tell his subordinates how he wants the attack to begin, then he may tell 
them what he wants done after the first part of the attack, depending upon 
what the enemy's actions have been up to that point. 

The outcome of a game will depend upon the strategies employed by 
every player. Let us call the set of possible strategies that the i-th player can 
use S^ This is the set of every possible plan of action that the z'-th player 
can have, taking into account his resources, what he can do with them, 
and also taking into account every possible set by his opponents. Suppose 
that the i-th player selects a strategy s 4 out of all his available strategies 
5 4 . The outcome of the game to him will depend upon what he did and 
what his opponents did. His payoff is a function of the strategies employed 
by all the players. We can denote the payoff to the i-th player by the payoff 
function P 4 (s±, s 2 , s 3 , . . . , s n ). The possible payoffs in chess are win, lose, 
or draw; in poker they are various sums of money; in business, profits and 
growth. In every case each player must have a method of valuation or a 
utility function which enables him to decide whether or not one payoff is 
better than another. In business and in games the payoff may be in money 
and there may be no difficulty in distinguishing between a payoff of $1,000 
or one of $100. However, in many cases the payoff can be complicated by 
other factors. For instance, the payoff arising from following one line of 
action in battle may result in 1,000 enemy casualties at a cost of 200 men 
lost; another line of action could result in 5,000 enemy casualties at a 
cost of 2,000 men lost. It is difficult to say which is preferable. 

In general, a player has a valuation scheme by which he can evaluate 
the worth of any set of prospects with which he is confronted. For instance, 
we assume that a player knows whether or not he would rather make a 
profit of $1 billion or $10 million. The game in which he is playing may 
be such that he can never obtain a profit of $1 billion. This amounts to 
saying that the prospect of a profit of $1 billion to a player is not a possible 
payoff in this game. 

We may now reformulate the problem of game theory. An iV-person 


game consists of a set of N players, each in control of a set of strategies S 4 , 
i = 1, 2, . . . , N; each player has a payoff function P, (s lf s 2 , . . . , s n ) which 
tells him what prospect he receives as his payoff if each player has chosen 
his strategy s t . The object of every player is to attempt to obtain a payoff 
which yields him a prospect of maximal value. 

The technical terms described above give us a method whereby we can 
formalize any sort of situation involving conflict. For the general purposes 
of the game theorist this is very desirable. However, those of us interested 
in management science must ask: Can the general scheme be applied to 
areas of specific interest to us? It turns out that the simplest sort of game 
we can discuss has several useful applications. 


The two-person zero-sum game is a game in which the amount that one 
player loses is precisely the amount that the other player wins. Two-person 
poker, matching pennies, and most other two-person games are of this 
variety. Competition between two large firms may not be of this type. A 
price war may damage both of them; collusion may help both of them. 
However, there are situations in business and war which can be approxi- 
mated by a zero-sum model. 

We can display the relevant features of a two-person zero-sum game by 
making use of a payoff matrix. A whimsical example serves as an illustra- 
tion. A bootlegger has two possible routes over the border: one is down the 
highway and the other through the mountains. If he could go down the 
highway unhampered, he could take a fully loaded truck and make a tidy 
profit. If there is a light police guard on the main road he can avoid arrest 
but will not be able to get his load through and will have to lose the expense 
of the journey. If there is a heavy police guard on the road, he will be caught 
and will be arrested and lose his load. The mountain road is such that he 
can only take a small load. If it is unguarded, he will have no trouble. If it is 
lightly or heavily guarded, then he can still get through but will have to 
bribe the peasants to get him by the police. The police have three alterna- 
tives: they can put a heavy guard on the main highway, leaving the moun- 
tain route unpatrolled; a heavy watch on the mountain route, leaving the 
highway unpatrolled; or to split their forces and put a light guard on both. 

We can display the bootlegger's values for the six possibilities as follows: 

Guard Only Guard Both Guard Only 

Highway Routes Lightly Mountain Road 
Highway —5 —2 5 

Mountain Road 2 11 

The police's preferences are diametrically opposed to those of the boot- 
legger; thus, their valuation for any outcome is the negative of his. We 
call this type of game strictly determined because, upon examination of 

Strategy of 


















the payoffs, there is a definite optimal choice for the bootlegger which is 
to take always the mountain road, while there is also an optimal choice 
for the police which is to guard both roads lightly. Both sides can work 
out that they can always enforce this compromise on the other but can 
enforce nothing better. The bootlegger knows that if he chose the highway, 
the police would try to minimize his gain and could guard it heavily; if he 
chose the mountains, the police would try to minimize his gain and guard 
the mountains; but even if they did so, the worst that could happen to him 
is that he would be able to get a small shipment in after having bribed the 
peasants. The police argue that if they decided to guard the highway only 
the bootlegger would use the mountains; if they guarded the mountains 
only, he would use the highway; if they guarded both lightly, he would use 
the mountains but would only be able to get a small shipment by them, 
no matter what he did. We can illustrate these computations by adding a 
column giving the minimum of each row in the matrix, and a row giving 
the maximum of each column: 

Strategy of 


The column represents the computation done by the bootlegger which 
tells him what the police could do to him if he chose strategy 1 or 2. The 
row represents the computation done by the police on the assumption that 
the bootlegger would try to maximize against their actions. By choosing 
the mountains, the bootlegger guarantees for himself the maximum of the 
minima. By putting a light guard on both roads the police guarantees that 
the bootlegger can never get more than the minimum of his maxima. But 
we observe that here the 

Minimax. = Maximin. = 1 . 

The bootlegger can guarantee a small trade for himself, and the police can 
guarantee that it stays a small trade, no matter what the other side does. A 
game which has the property that each side has a strategy which results 
in the maximin. being equal to the minimax. is said to possess a saddle- 
point. An economic interpretation can be given to this value. When the 
bootlegger decides to retire, the market value of his trade should be that 
amount which yields an income of 1 in the same period as it takes per trip. 
Not all games possess saddlepoints and, in those which do not, it is not 
possible for one side blithely to pick a strategy which guarantees very 
much. For instance, suppose that there had been a general overhauling of 
both bootlegging and police techniques. The bootlegger had obtained bet- 
ter trucks, and the police managed to stop bribery in the mountains. The 
effect of the better trucks is that the bootlegger can get by a light police 


ategy of Police 

















guard at the cost of some breakages and personal strain. He now can carry 
a bigger load both on the highway and in the mountains. The effect of the 
police improvement is that a strong patrol could catch the bootlegger if he 
were in the mountains. The new payoff matrix is: 

Strategy of 



If the bootlegger persists in sticking to the mountain route, he will be lost; 
if he keeps to the highway, he will be lost. There is no longer a simple 
decision to which he can commit himself which will yield him a guaranteed 
profit, even though his techniques seem to have improved more than those 
of the police. He still has a profitable trade, however, and there is a way 
for him to guarantee himself an expected profit by following the actions 
and precepts of most decision-makers in competitive trades, and that is to 
take a calculated risk. His problem is to decide how to calculate the risk 
he should take. He is a prudent man and has no false illusions about the 
stupidity of the police. He knows, for instance, that the police will never 
split their forces because this would amount to handing him an income of 
3 per period, no matter what happened. The bootlegger wishes to calculate 
what is the biggest expected income that he can guarantee for himself, 
regardless of what the police tries to do. At the very worst, they could find 
out his plans and maximize their return, i.e., minimize his return given 
this information. If he definitely commits himself to one action and plays 
a pure strategy, he stands to lose 5. He may, however, decide not to commit 
himself directly but to choose between his two pure strategies according 
to some probability weighting. We call the use of such a device, which 
attaches probability weightings to a set of pure strategies, a mixed strategy. 
By using a mixed strategy he can guarantee an expected profit, even if the 
police were to find out his strategy. 

Suppose he decides to take the highway with a probability of x ± and the 
mountains with a probability of x 2 , where x 1 + x 2 = 1. He wishes to pick 
these numbers in such a manner that he can make his expected return, 
which we call V, as large as possible under all circumstances. If the police 
employed their strategy 1 against him, his expected return would be: 
— bx 1 + 6x 2 . This must be greater than, or equal to, V. Similarly, for the 
other strategies, we can write down an inequality. We find that we must 
solve the following set of equations and inequalities: 

- 5^ + 6*2^ V 
3^ + 3*2^ V 
6x 1 -f 5% 2 + V an d *! + x 2 = 1 . 

Similarly, the police wish to make sure that no matter how shrewd the 
bootlegger becomes they will be able to restrict his expected gains as much 



as possible. In fact, they can make sure that he never can get more than 
an expectation of V. The police decide to guard the highway with prob- 
ability y lt split forces with probability y 2) and guard the mountains with 
probability y 3 , where y 1 + y 2 + y s = 1- The police must solve the following 
set of equations and inequalities: 

- 5?i + 3y 2 + &v 3 =g V 

fyi + fy 2 - 5y 3 = v and y± + y 2 + )>3 = L 

The general method for the solution of such systems can be found in Mc- 
Kinsey's book; 2 we present a graphical method for this 2x3 game. 

Graph I 

If the first player uses the probabilities of x t and 1 — x 2 and if the sec- 
ond player uses his first pure strategy, then the expected payoff for the first 
player is — 5x ± + 6(1 — x ± ) = 6 — llx^ similarly, we get two other ex- 
pressions if the second player uses his second or third pure strategies. We 
now draw a diagram with the three lines: v = 6 — ll^; v = 3; and v = 
11^! — 6 represented over the interval (0, 1). For any x t chosen by the 
bootlegger he can guarantee for himself the minimum value of the three 
lines at x ± ; thus, we see here that the optimal choice for x ± is y 2 . Hence, 
his mixed strategy uses each of his pure strategies with probability of y 2 
and can be expressed as (%, y 2 ). It is clear that the police will never use 
their second strategy; thus, we need only investigate the probability weight- 
ing of the police to guard the highway or the mountain road. Their optimal 
strategy is (%, 0, y 2 ). Using these strategies, we can see that the value of 
the game is V — y 2 . Even with better equipment, his business is now worth 
less than before. 

We note that the use of probability in a mixed strategy is a strategic use. 
Any mixture other than an optimal one leaves the player open to damage 
that he could have avoided, regardless of his opponent's actions. 

2 McKinsey, J. C. C, Introduction to the Theory of Games (Santa Monica: RAND 
Corporation, 1952), chap, ii and iii. 



1. Business Problems 

The type of problem to which this theory has a direct application is one 
which has some of the aspects of a duel. A duel has the property that the 
goals of the opponents are diametrically opposed. In any market in which 
the size of the demand is more or less fixed by the government or by habits, 
the extra customers that one firm can attract must have been lost by an- 
other firm. The firms are in pure opposition in such a situation. What one 
gains, the other loses. An advertising campaign in a market for detergents 
may be of this nature. A highly simplified example is given below. Charnes 
and Cooper have written a more detailed paper on this topic. 3 

la). The Advertising Campaign. Two firms, A and B, each have a mil- 
lion dollars to spend on advertising their products in a certain market area. 
They can use the media of radio, television, newspapers, magazines, and 
billboards. For simplicity, we will group these five alternatives into radio, 
television, and printed media. The marketing research sections of each 
firm work out the expected effect of any contingency. We will discuss the 
decision-making at firm A only. A payoff matrix of 4 X 4 is drawn up. This 
contains information on the 16 contingencies that might arise if either firm 
spent all its money advertising solely by means of radio, television, or 
printed media, or decided to save the million dollars and not advertise at 
all. Each entry in the payoff matrix represents the amount of extra revenue 
above cost estimated under these circumstances (in millions of dollars). 



Printed Media 




- .5 






Printed media 


- .5 


No advertising 




We can see immediately that in this case the alternative of no advertising 
can be rejected. Any pure strategy, which can be rejected by comparing it 
with the other pure strategies and finding that there are others which are 
always better under every circumstance, is a dominated strategy and will 
not enter into a solution. In this simple example, where we have assumed 
that the firms must put all their money into one advertising medium, we 
can see by inspection that all the other strategies are dominated by tele- 
vision. This game has a saddlepoint at which both firms put their money 
into television advertising with the net result that they make the same as 
they would if neither advertised, but neither can risk not advertising. 

A more complicated and slightly more realistic example is obtained if 
we list a series of advertising campaigns involving different integrated pro- 

3 A. L. Charnes, and W. W. Cooper, "An Example of Constrained Games in Indus- 
trial Economics," (abstract), Econometrica, Vol. XXII (October, 1954), p. 526. 


grams using more than one medium. Consider each firm to have the choice 
of three types of campaigns: 

Program 1 Program 2 Program 3 

Program 1 2 4-2 

Program 2 4 2—2 

Program 3 -2-2 3 

The problem for firm A is to find three numbers, x lt x 2 , x:, such that 

2x t + 4x 2 - 2x 3 > V 

4x ± + 2x 2 - 2x 3 ^ V 

- 2x x - 2x 2 + 3x 3 ^ V 

where the 

Xj ^ and x x + x 2 + x 3 = 1 

The example above has a solution of x 1 = y 4 , x 2 = %, x s = y 2 , and V = y 2 . 
Two interpretations can be given to the x 3 . They can be regarded as prob- 
abilities which should be attached to the decision to adopt any specific 
program. Or, if it is possible to spend varying sums on the programs (with 
approximately constant returns), then the x if give information as to how 
firm A should split up its advertising budget between the three different 
programs. It should spend $250,000 on each of programs 1 and 2 and 
$500,000 on program 3. 

Organizations and Organizing 

When a business firm is viewed as a group of people co-operating to 
achieve a common purpose, the essential element of administration, as far 
as management is concerned, is the organizing process. The process of 
organizing individuals to co-operate in the achievement of a common goal 
is as old as civilization. The central problem in this process is to determine 
the activities necessary in achieving the goal and to assign individuals to 
each of those activities in such a manner that the work may be successfully 
performed. Papandreou provides an extensive coverage of organizational 
needs, for co-operation and co-ordination, treating both internal and ex- 
ternal influences. 

As organizations increase in size, the nature of the activities performed 
and the organizing process become more complex. Merriam demonstrates 
that the emphasis in organizing has changed from a dependence upon 
personalized authority to a formal structuring of the work units. Haire 
describes some of the necessary changes in the ''shape" or composition of 
an organization which are brought about by its increased size. 

In the conventional approach to organizing, both vertical and horizontal 
relationships are defined and established. The former are formulated upon 
the concept of some limitation of man to effectively administer to a grow- 
ing number of subordinates. Thus, authority and duties are separated in 
some vertical fashion, i.e., levels of management are created. Horizontal 
relationships are based upon the assumption of man's limitation in terms 
of comprehending increasingly complex systems. Therefore, to offset this 
limiting factor, authority and function are divided horizontally into de- 
partments. This division enhances specialization. 

Davis considers some of the problems associated with the horizontal 
fractionalization and assignment of work and authority within the logical 
structure of an organizational unit. He places particular emphasis upon 
line-and-staff relationships, indicating that the development of such rela- 
tionships is not an unmixed blessing. Suojanen treats the concept of the 
executive span of control — the number of men one superior can effectively 
supervise. He attacks the classical approach to this problem and outlines 
the problems of communication, motivation, co-operation, and integration 
versus specialization and unity of command. 

With increased recognition of the role of human values in the organizing 
process, the problems encountered are greatly increased. As intelligent 
consent of the membership replaces manipulation and coercion, new prob- 
lems arise which require new techniques for their solution. Basic to the 
solution of such problems is an understanding of the informal aspects 



of the organization. Barnard moves away from the strict formal structuring 
of an organization and interjects thought-provoking concepts concerning 
the nature and role of informal organizations as they interact with the 
formal or blueprint structure. 

The Economic Organization 


A. The Concept of Organization 

The fundamental building block of a conceptual frame of reference 
which assigns a central position to conscious cooperation is provided by 
Chester Barnard's concept of organization. Organization is defined as a 
"system of consciously coordinated activities or forces of two or more per- 
sons." 1 It should be stressed that it is only the system of personal inter- 
actions that makes up the fabric of organization. Organization is not con- 
ceived, then, as a group of persons; rather it is conceived as an action field, 
as a system of consciously interdependent actions of two or more persons. 
When we consider persons in their roles as members of an organization, 
we regard them in their purely functional aspects, as mere phases of co- 
operation. The persons as such, whether they be conceived as physical, 
biological, or psychological and social entities, do not belong to organiza- 

Closely related to the concept of organization is the concept of a co- 
operative system. Organization is an instrument of the cooperative system; 
so are the persons whose activities constitute organization, and the physical 
plant which goes hand in hand with persons and organization. Persons 
and physical plant constitute a cooperative system (rather than an aggre- 
gate) by reason of the fact that the activities of the members are consciously 
coordinated toward the achievement of at least one definite end. 2 

The following conditions must be met for organization to emerge: first, 
persons must be willing to contribute activity to the system; secondly, they 
must share a common goal; thirdly, deliberate communication must be 
possible and present. The first two conditions must be met if the pattern 
is to be considered consciously cooperative. The third condition, deliberate 

* Andreas Papandreou, "Problems in the Theory of the Firm," Bernard F. Haley, 
ed., Survey of Contemporary Economics, Vol. II (Homewood, 111.: Richard D. Irwin, 
Inc., 1952), pp. 185-194. 

i Op. cit., p. 73. 

2 ibid., p. 65. 


communication, must also be met if conscious coordination and, therefore, 
organization is to emerge. Herbert Simon, who on the whole accepts the 
Barnard schema, prefers to state the problem in the language of the theory 
of games. 3 The cooperative pattern emerges when the participants prefer 
the same set of consequences. If anticipations concerning one another's 
behavior are correct, all will act to secure these consequences. In the ab- 
sence of deliberate communication, however, the pattern may be expected 
to be highly unstable. Conscious coordination is the device or process 
whereby each participant is informed as to the strategies selected by the 

Organization in Barnard's sense obtains whenever the activities of two 
or more persons are consciously coordinated with a view of achieving a 
common goal. 4 Organization is, therefore, ubiquitous. It extends from the 
simplest and most unstructured cooperative activities to the most complex 
and imposing structures. The act of exchange may be chosen as an example 
of the simplest sort of organization. Willingness to participate, joint goal 
(in some sense), and deliberate communication are all present. To the act 
of exchange which constitutes simple organization can be contrasted the 
complex organization which typically obtains in the case of the firm. The 
firm is in fact a cooperative system possessed of an organization which is 
both stable and complex. Stability in this connection refers to the non- 
ephemeral character of at least a part of the interactions which are in- 
cluded in the enterprise. Complexity refers to the fact that (typically) the 
firm's organization is made up of a system of simple or unit organizations. 
The process of communication in a complex organization cannot be left 
to chance. It becomes specialized in centers of communication. These fairly 
stable centers of communication make up the executive (sub-) organization 
of the firm. The executive-administrator is regarded within this frame of 
reference as a communication center as the functionary who informs the 
participants of one another's strategies so that the cooperative goal may 
be achieved. Communication of the strategies involved in the process of 
cooperation is a necessary condition for the performance of the executive 
role. It is not a sufficient condition, however. The executive is not a mere 
center of communication. He also wields authority over the participants. 
The executive function, therefore, implies the issuing of coordinating and 
authoritative communications to those who contribute activities to the 
firm's organization. Authoritative coordination lies at the heart of the 
concept of the firm. Since authority plays such an important role in the 
concept of the firm selected in this essay, it is necessary to provide a defini- 

3 Op. cit., pp. 72-73 

4 The reader must be warned that the discussion of the concept of organization in 
this essay is confined to what Barnard calls formal organization. To formal organiza- 
tion Barnard contrasts informal organization. The latter refers to the set of interactions 
among persons which are not governed by a common goal and which, therefore, are 
not consciously coodinated. The concept of informal organization is akin to the social 
psychologist's concept of the group. 


tion of the term. Following Barnard and Simon we may define a com- 
munication as authoritative if the recipient accepts it as determining the 
premises of his choice of action "without deliberation on his own part on 
the expediency of those premises." 5 

B. The Process of Coordination 

The conception of the firm as a cooperative system permits the organiza- 
tion theorist to set up a "rational" model of the firm closely resembling that 
of the economist; but, at the same time, it enables him to employ much 
of the available sociological and psychological material. 

The rational model of the firm as constructed by the organization theo- 
rist resembles that of the economist in that rationality is attributed only 
to the executive organization or some segment thereof (corresponding 
closely to the economist's concept of the entrepreneur), while the economist 
completely removes from his model all agents other than the entrepreneur. 
The organization theorist, while including in his model the activities of 
the operative (nonexecutive) staff, views them as being partly rational and 
partly nonrational. In so doing, however, he does not destroy the purely 
rational character of the total construction. This is accomplished by re- 
garding the activities of the operatives as manipulable components of the 
system. The sociological and psychological considerations enter the ra- 
tional administrative action model as data in a means-ends problem, in the 
same fashion that end systems, technologies, and institutions enter the 
rational action model of the economist. Organization theory and the econ- 
omist's theory of the firm are seen to converge, in fact, as soon as we 
introduce organizational techniques as data into the latter, side by side 
with the technological data. 

Adoption of the rational model implies that we regard the executive 
organization of the firm or some segment thereof (which might be identi- 
fied as the apex of the executive pyramid) as seeking to achieve ends with 
scarce means in a rational manner. This implies that administrative action 
is regarded (within the confines of the model) as efficient. Efficiency in turn 
implies that the means employed in the attainment of an end system are 
minimized or conversely that the ends attained from a given set of means 
are maximized. 

The organization goals constitute the fundamental value premises of 
the system. 6 We are not concerned at this juncture with the manner in 
which these goals are formulated and the reasons for their acceptance by 
the executive as guiding his actions. This will concern us in detail at a 
later stage of the argument. All that needs to be emphasized here is that 
these goals are best regarded as being related to one another through a 

5 Simon, op. cit., p. 125. Simon has introduced, in this connection, the concept of 
the "area of acceptance." The area of acceptance may be denned as that subset of all 
actions which may be performed by an employee with respect to which he is willing 
to accept the executive communication as guiding his behavior. 

6 Cf. ibid., chap. iii. 


utility index of some sort. Nor is it necessary that we consider them to be 
ultimate ends; it would be preferable to consider them as intermediate 
stages in a means-ends chain in which they function as value indices of 
some sort. The goals of the firm — in the sense just described — must be 
contrasted sharply to what may be called the function of the firm. Func- 
tion, in this sense, refers to the intended output of the firm, whether it is 
a service or a commodity. The function of a shoe manufacturing firm, for 
instance, is the production of shoes. It should be clear that when we talk 
about the utility index, the value premises accepted by the executive as 
guiding his actions, we make no commitment on the number or type of 
ends that enter the system nor do we make a commitment relating to the 
manner in which they are ranked. The statement is perfectly general, per- 
mitting any interpretation which is suitable in any concrete cases we care 
to study. It is conceivable, for instance, that the function of the firm may 
enter explicitly the value premises accepted by the executives as guiding 
their actions. Concern with "service" in this sense may, in fact, be prevalent 
in the case of government corporations, public utilities, etc. It is also 
possible that the conservation of the firm may become one of the ends 
sought by the executives. Students of administration seem to be convinced 
that this is typical rather than unusual, at least in the case of the large 

Given the goals of the system, the (rational) executive engages in action 
which will enable the firm to attain them in an efficient way. This process 
involves (1) substantive planning, (2) procedural planning, and (3) execu- 
tion of both plans. 7 Substantive planning essentially refers to the con- 
struction of the firm's budget, 8 whereas procedural planning refers to the 
construction of the psychological environment of decision necessary for 
the emergence of the organization. Substantive planning, procedural plan- 
ning, and execution of the plans should not be conceived as a series of 
separate steps but rather as an integrated whole. 

The structure of the system of communications and authority is the key 
to the procedural plan. This involves much more than the preparation of 
an organization chart specifying the channels of communication and au- 
thority. If the persons contributing activities to the firm's organization 
were regarded as rational agents, not much more than the organization 
chart would be needed. Under such conditions the operative could be con- 
sidered as substituting organizational value premises for his private value 
premises and proceeding to act efficiently in a more or less automatic 
fashion. This construction implies that the operative (or, in fact, any con- 
tributor of action to the organization of the firm) substitutes a preference 
system communicated to him by the executive for his own personal prefer- 
ence system. 9 

t Ibid., p. 96. 

8Cf. G. F. Thirlby, "Notes on the Maximization Process in Company Administra- 
tion," Economica, Vol. XVII (August, 1950), 266-82. 

9 For a discussion of these issues, see Simon, op. cit., chaps, vi, x. 


The model of organization just presented is pegged upon the assumption 
of rational action on the part of all the participants in the organization 
of the firm. If it is recognized, however, that action is partly rational and 
partly subject to habit and the stimulus-response pattern, the procedural 
plans must elaborate the structure of internal influences as well as of 
authority which will provide the appropriate stimuli and lead to the 
establishment of the repetitive patterns which are necessary for the efficient 
attainment of the organizational ends. Learning theory and social psychol- 
ogy will provide the information necessary for the formulation of the 
appropriate procedural plan. The inculcation of loyalty to the organiza- 
tion and to the organizational goals, the development of efficient patterns 
of action and high morale become most important under these circum- 

The distinction between influence and authority must be elaborated 
somewhat if we are to avoid making some of the conventional errors of 
students of administration. In a complex organization, centers of communi- 
cation are established which issue information to the participants con- 
cerning one another's strategies. When these communications are accepted 
by the recipient as determining the premises of his choices "without de- 
liberation on his own part on the expediency of those premises," 10 a rela- 
tionship of authority exists between the issuer and the recipient of the 
communication. Authority, we have already seen, is of the essence in the 
structure of the firm. Authority in this sense, however, need not be exer- 
cised exclusively in a downward direction, though it is undoubtedly pre- 
dominantly exercised in this manner. It may be exercised sideways and 
even in the upward direction. The structure of authority as it is depicted 
in organization charts refers not to the actual pattern of authority, but 
rather to that expected to prevail in the "normal" course of events. Influ- 
ence implies suggestion and persuasion rather than command. The recipi- 
ent of influence may accept a communication as governing his action; he 
does so, however, following "deliberation on his own part on the ex- 
pediency" of the premises contained in the communication. The structure 
of influence is obviously of crucial significance in the functioning of an 
organization, especially in view of the fact that it is difficult to identify and 
control its sources. 

Executive organizations in large or complex firms are themselves com- 
plex. This complexity expresses itself in a twofold manner. First, the lines 
of authority become elongated. Secondly, at any one level of this verti- 
cal scale of authority, executive work is divided into specialized function 
segments, giving rise to what may conveniently be called horizontal de- 
centralization of authority. A large and complex firm, then, is almost in- 
variably associated with an executive process which is decentralized both 
vertically and horizontally. With respect to the vertical decentralization 
of authority it is important to contrast peak coordination to inferior or 

10 ibid., p. 125. 


subordinate coordinating activities. Peak coordination includes all the 
executive tasks performed at the apex of the executive pyramid. Authori- 
tative and conscious coordination at its peak levels is carried on with a 
sense of the whole and in view of the total complex relationships of the 
firm to its social and physical environment. The internal and external 
equilibria of the system are sought simultaneously against the constellation 
of data confronting the firm. At levels inferior to that of peak coordination, 
this complex totality is lost. The outstanding characteristic of the peak 
coordination level of the executive organization is that it is not subject to 
horizontal decentralization. It should be clear, of course, that the fact that 
peak coordination is not subject to horizontal decentralization does not 
imply that the function must be performed by a single person. It is possible 
to allocate this function to a group rather than to an individual (an 
"organization" in Barnard's language). Although, then, peak coordination 
must be carried out by a single agency, the "singleness" of this agency must 
allow for subtle qualitative and quantitative variation in its composition. 
G. F. Thirlby prefers the term maximization center for describing what 
has been called peak coordinator in this essay. 11 The substantive plan of 
the firm, according to Thirlby, is incorporated into the operating budget 
which is formulated by the maximizing center. The executive function at 
lower levels than that of peak coordination does not consist merely in 
the execution of the rigid orders of the peak coordinator. The task of 
selecting strategies, the task of selecting among alternative courses of ac- 
tion, is distributed, in general, throughout the organization. "Initiative 
may be exercised: (a) within the tolerance limits allowed by standing or- 
ders; (b) in the planning process leading to the board's decision which lays 
down standing orders." 12 The extent to which strategy selection is dele- 
gated down the lines of authority varies from case to case. What is crucial 
to keep in mind, however, is this: the extent and character of the delegation 
is an integral part of the procedural plan selected by the peak coordina- 

11 Op. cit., p. 267. 

12 Ibid., p. 271. 

13 A number of empirical studies have been published during the last decade dealing 
essentially with the problem of location of the "decision-making" function in the con- 
temporary enterprise. Clearly the outstanding study is R. A. Gordon's Business Leader- 
ship in the Large Corporation (Washington, D.C., 1945). It is mandatory reading for 
all concerned with problems of enterprise structure. P. E. Holden, L. S. Fish, and H. 
L. Smith's Top Management Organization and Control (Stanford, 1941) is one exception 
to the run-of-the-mill management studies in that it combines a conceptual framework 
and case-study material. It seems on the whole, however, to be more normative than 
observational-analytical in character. The Harvard Graduate School of Business Admin- 
istration studies of the board of directors, despite their informative character, com- 
pletely lack a conceptual famework. Such generalizations as are presented in these 
studies merge with normative considerations to produce a list of more or less loosely 
stated recipes for running a business. I am specifically referring to J. C. Baker, Directors 
and Their Functions (Boston, 1945), M. T. Copeland and A. R. Towl, The Board of 
Directors and Business Management (Boston, 1947), and M. L. Mace, The Board of 
Directors in Small Corporations (Boston, 1948). 


C. The Process of External Influence 

In the preceding section we considered the flow of authority and influ- 
ence within the firm as they relate to the attainment of the firm's goals. 
Both the goals toward which the firm strives, however, and the manner in 
which they are attained are subject to powerful and all pervasive influences 
from outside the firm. 14 This is just another way of saying that the firm 
is a component of a much broader cooperative system which, in its informal 
aspects, becomes coextensive with what we call society. In a typical firm- 
and-market economy we are confronted with a process of cooperation which 
is partly conscious and partly unconscious. Within the firm, cooperation is 
of a deliberate character, with the conscious coordination of activities sup- 
plied by the firm's executive organization. In contrast to this, cooperation 
as it concerns the relations among firms (for that matter, as it concerns 
the relations among "units" in general), is unconscious; the interfirm or 
interunit coordination is supplied by the system of markets. 15 

No less important is the unconscious influence provided by the mores, 
folklore, customs, institutions, social ideals, and myths of a society which 
lay the foundation for formal organization. More immediately relevant to 
any one firm's behavior are the standards and values of the groups and 
communities with which it comes into contact as an organization, as well 
as the groups, communities, and organizations to which its members be- 
long. It should be clear that the preference system of the firm, as well as 
the attitudes of the participants in the firm's organization toward such 
things as cooperation, authority, efficiency, innovation, etc., must be pro- 
foundly affected by the broader community within which the firm oper- 
ates. 16 

Side by side with these unconscious societal influences we find influences 
exercised consciously by a variety of organizations, groups, and persons 
which in one way or another are affected by the firm's behavior (i.e. con- 
stitute "interest groups"). This set of influences is highly heterogeneous; in 
order to make some headway, therefore, in the analysis of their conse- 
quences upon firm behavior some attempt at classification must be made. 17 
To begin with we are concerned here with conscious external influences 
rather than those of an internal nature. The latter have already been dis- 

14 The reader should be warned that the term "influence" is used in this connection 
in the loose lexical sense rather than in the technical sense imparted to it by Simon's 
definition. Hereafter, whenever we employ the term in its technical sense, we shall 
italicize it. 

15 In this connection see R. H. Coase, "The Nature of the Firm," Economica, Vol. IV 
(November, 1937), 386-405. 

16 For an excellent presentation of these issues the reader is urged to see H. A. Simon, 
D. W. Smithburg, and V. A. Thompson, Public Administration (New York, 1950), 
chap. iii. 

17 See Gordon, op. cit., chap, vii, and G. C. Means in National Resources Committee, 
The Structure of the American Economy (Washington, D.C., 1939), Pt. 1, chap, ix, for 
two attempts at presenting a consistent system of concepts. 


cussed in some detail in the preceding section. An influence is regarded as 
being internal if it is exercised by a participant in the organization (in the 
Barnard sense) during the process of conscious cooperation. It follows that 
the highest level of authority (in the sense of channels of authority expected 
to hold under "normal" conditions) from which internal influences can 
be exercised over the organization is that of the peak coordinator. The 
peak coordinator may himself be influenced by communications (or antici- 
pations of communications) issued by stockholders, creditors, a union, and 
so on; such influence, however, will not be regarded as internal since it is 
not a component of the system of activities which are coordinated by the 
organization's executive. 

Conscious external influences may be broken down into two categories: 
(1) the exercise of influence and (2) the exercise of authority. External in- 
fluence and authority may be exercised over a firm by: (a) the government 
(in its sovereign aspects); (b) groups earning income by contributing fac- 
tor services to the cooperative system (i.e., owner-stockholders, lenders of 
money, suppliers of goods on lease, operative labor, executive and profes- 
sional labor); (c) buyers of the firm's product; (d) sellers of products and 
services to the firm; (e) competitors in the factor and product markets; (/) 
other persons, groups, or organizations which take interest in its opera- 
tions. The degree of influence that such groups are in a position to exercise 
probably varies with their "power," whatever this ambiguous term may 
be taken to mean. 

One final distinction seems necessary at this juncture. When the exercise 
of influence has as its immediate object the peak coordinator, it may either 
affect his conception of the broad value premises, the preference system 
of the organization, or it may affect the objective environment, the factual 
premises of his decision. 18 In the former case the results sought by the 
organization are modified or even radically changed as a result of the influ- 
ence exercised. This implies that a new strategy will be selected. In the 
latter case the results sought are not affected, but, since the factual premises 
are changed, the strategy will have to be modified. 19 

18 The distinction between factual and value premises is discussed at length in Simon, 
op. cit., chap. iii. 

19 It should be stressed that the value premises of enterprise strategy selection may 
be significantly affected as a result of the exercise of internal influence and authority 
in the upward direction. Executives at levels below that of peak coordination may at 
times be very influential in the formulation of the preference system of the firm. Such 
influence is regarded as internal since it is exercised by participants in the firm's organ- 
ization in their capacity as participants rather than as a "bargaining" group. In this 
connection see E. S. Mason, "Price Production Policies of Large-Scale Enterprise," 
Am. Econ. Rev., Proc, Vol. XXIX (March, 1939), 61-74. 


Changing Patterns in Organizing 

Is there any net result of all these analyses and discussions regarding the 
meaning and implications of management? Do the psychologists, the psy 
chiatrists, the biologists, the sociologists, the statesmen, the students of 
mass management in armies, in factories, in governments, the administra- 
tors, public and private, converge in their conclusions toward any sig- 
nificant points of central interest? Widely divergent as the different ap- 
proaches may be, they have striking similarities when viewed as part of 
the general development of the emerging intelligence of our day. 

I. Organization now deals with new precision tools of management, with 
new knowledge of personalities, with psychology, statistics, more intimate 
studies of human interrelationships, background studies of the human 
environment and of the elements of organization. This huge apparatus of 
inquiry, analysis, and understanding is a characteristic feature of organiza- 
tion in the new day. It is the breakdown of primitive maxims with the 
addition of many newly recognized elements from which new analyses are 
made. The technical apparatus of modern organization is far more com- 
plicated, elaborate, and scientific than that of preceding generations. We 
now know how to produce, how to fight, how to administer social affairs, 
public or private, on a massive scale; and no modern group is unmindful 
of the technical tools available for this purpose. 

II. Organization tends to escape from its original trappings of personal 
authority and hierarchical rankings into a field of more truly organic re- 
lationships. Plato at an early date discussed, it is true, a crude form of 
psychobiological organization of the states. But this was forgotten in the 
later development of governmental forms. Organization became the pro- 
jection of the personality of the ruler — the extension of his authority be- 
yond his view; he divided and subdivided, delegated and deputed, his 
divine or semidivine authority beyond the bounds of his court, much as 
he might allot his distant lands and cattle to others. The central points in 
the picture were his unique personality as the focus of order and, of course, 
the difficult explanation of the transmission of power. Inequality, igno- 
rance, and force were the tools of authority. In our own day these ancient 
relics still survive in the fanfare of the Duce and the Filhrer, and their 

* Charles E. Merriam, Systematic Politics (Chicago: University of Chicago Press, 
1945), pp. 167-70. 


doctrines of the inequality both of individuals and of groups of men and 
of violence as the mode of persuasion. 

Organic theories, as distinguished from personal theories of organiza- 
tion, were revived and developed in the nineteenth century but were clumsy 
and at times even amusing in their effort to portray analogies between the 
human body and the body politic, whether in Bluntschli or in Spencer. In 
our time organization has taken on what might be called a pattern form — 
an organic division of labor with an organic synthesis of connecting and 
related items of behavior. 

Emphasis is no longer laid as strongly as before upon personalized au- 
thority but upon organic position and relationship; upon the significance 
of the service performed by the particular persons operating in the general 
system with others. It is not the authority per se or the hierarchy per se 
but the role planned, the contribution or the service rendered — in short, 
the functions — that give it importance and recognition. In modern organ- 
ization no man is fit to command who commands solely by virtue of his 

This is language understood alike by the psychologist, the biologist, the 
sociologist, and the student of mass behavior in all forms of social rela- 
tions. Organizing is thus no longer accepted, either as a personal enterprise 
or as primarily designed to balance or check one factor against another in 
some mechanical fashion, but as a nucleus of dynamic co-operation for the 
achievement of an organic or common, purpose or design. Its difficult task 
is that of harmonizing, stabilizing, and energizing a series of personalities 
themselves not fully integrated and also a series of hierarchies running 
through many forms of groupings. The club will not do this — or not for 
long. There is needed a fusion of interests and ideals, a common sense 
of direction — and the direction is justice. 

III. Again, the distinction between structure and function is now less 
sharply stated. When I first studied "civil government," it was all forms 
and no functions. But in a sense structure is function and function is 
structure. The most acute of organizational specialists love to wrangle 
over the disputed topic of the proper degree and type of "functionalism" 
in a given organization — or in general, for that matter. 

Is the essence of organization the structural parts which make up the 
organizational pattern, 1 or is the essence of organization the function it 
performs in the body politic? Is the organization the convenient tool of 
the function? Since the rise of the common good as the goal of the political 
society, it has been recognized that formal structure was of secondary sig- 
nificance, although this was often said with the tongue in the cheek by the 
potentate who would interpret the common good in his own special man- 
ner. Out of the overemphasis on organization arose the special position of 

i See L. K. Frank, "Structure, Function, and Growth," Philosophy of Science, Vol. II 
(1935), 210-35. 


legal priority and symbolic precedence and eventually of special status ac- 
corded to the personal holder of the structural point of vantage and to 
the office itself even under democratic auspices. For in democracy as in 
autocracy the personal holders of special privilege may sometimes attach 
themselves to structural points which they hold long after the functional 
purpose has been served and forgotten, avoiding the test of present-day 

That organization should sometimes stand in the way of the functioning 
of the common good is, indeed, contradictory but common. The function 
of organization itself is, of course, the service of the common good. Yet as 
not only are there awkward vestiges of survival but there are cancerous 
growths in organisms which turn upon and consume their own bodies, 
likewise in bodies politic there are inverted growths of a vigorous type 
which turn against the life that made them. In both cases we strive, of 
course, for cure and prevention. We do not yet understand virus very well, 
either in biology or in politics, what it is or how to prevent or to cure it. 
r~ I conclude that in recent times the significance of organization rests less 
1 upon mechanical structure and more upon function. There are more di- 
mensions in organization than the flat surface of the chart or blueprint 
V-Jiiay indicate. Much more suggestive are the recent air maps. The fixed 
forms of structure are less emphasized than in earlier times, while at the 
same time the priority of the function as over against the structure per se 
and the official per se is increasingly accepted. The doctrine of "a govern- 
ment of laws and not of men" finds strong support in the modern inquiries 
and conclusions emerging in various forms of functionalism. The move- 
ment is away from arbitrary personal authority to justification on the 
ground of community service. The last refuge of "personalism" is seen in 
"leaders," so called, who admit community service as their goal, or "stew- 
ardship," or "trusteeship" but struggle in vain to escape definite respon- 
sibility for their acts. 

IV. Organization is now upside down in its emphasis and balance. Com- 
pared with earlier positional relations, slave organization and free organ- 
ization are different solar systems. Present-day organization revolves around 
the dignity of man, the development of human values. Production and its 
machinery are the tools of man. Man is not a cog in a machine, but the 
machinery and the organization are by and for him. Thus there is a new 
center of gravity in organization. This does not destroy organization and 
morale, but it is its modern foundation, stronger than any other. 

Masses of men and women — millions of them — now know more about 
organization, its meaning and apparatus, than ever before in human his- 
tory. Its cult is no longer secret or magic. What now appears is a reasonable 
expectancy by those concerned that under such and such conditions such 
and such an outcome will follow, in an organizational pattern, of which 
they are parts, and in which they share responsibility. Concretely there will 
be an acceptable division of labor which it is expected will be followed; 


workers will know what is to be done, and leaders may be expected to give 
directions which will presumably be followed. There will be understand- 
ings and expectancies, and there will be an authentic interpretation by 
some definite person or center — for the time being. There will be a gen- 
eral understanding of the broad directive or purpose of the undertaking, 
as in wartime rationing and priorities. Finally, there will be a general 
consent or assent to the general body of understandings and institutional 
and personal implementations. Intelligent assent or consent is the condi- 
tion of true liberty, for it assumes a range of choice. Society is thus an 
aggregation not merely of bees or ants or other animal societies but of 
rational beings. If these reasonable expectancies, established by general 
concurrence, break down, the system does not function, or not effectively, 
or on the optimum level of operation. 

It is not raw and arbitrary force that really rules and gives direction. 
Force itself lies in established understandings and expectancies in private 
as well as in public government and in their flexible development in the 
emerging situations, stable or changing as the case may be. Of course, un- 
reflective custom, unquestioning obedience, unwillingness to assume re- 
sponsibility, fear, and violence all play a part in organizational systems, 
but not the principal role or the long-time role of organizations operating 
on the highest level of efficiency. Masses of men obey with little resistance 
up to a point, perhaps a tragic point; but that point must not be too closely 
approached or too often — whether dealing with an army, with factory 
workers, with government employees, or even with professors. 


In speaking of the "size" of a firm, it is fairly obvious what we mean by 
a big one and by a small one. However, when we attempt to describe size 
more precisely, it is not so easy because we are faced with several alterna- 
tives: Is the best measure of size the number of employees? Or the yearly 
dollar volume of business? Or the capital investment? Surely, these may be 
quite different approaches, and we are all used to cases in which we have 
the feeling that one of them, rather than the others, is the most appropriate. 

In addition to the problem of describing size, we are confronted with a 
variety of opinions about size. A public and political opinion which is 

* Mason Haire, "Toward a Theory of Industrial Organization," Changing Patterns 
and Concepts in Management, General Management Series No. 182 (New York: Ameri- 
can Management Association, 1956), pp. 30-38. 



current just now in some quarters seems to suggest that large size is in 
itself bad, although this is not a position that is documented in much 
detail. Size itself has some implications, but I do not see that it is neces- 
sarily a liability. 

In any case, size is clearly a problem to the organization. Everywhere, 
we see big firms plagued by the problems of size and considering decen- 
tralization as a solution or, alternatively, the tightening of front-office 
control to keep a large structure workable. Medium-sized firms are growing, 
merging, diversifying, and, in general, being tremendously concerned with 
their changes in size. Small firms, too, are nervously viewing their structure 
and wondering if a firm so constituted, and of such a size, can long endure. 
Everywhere the size problem is with us, but we don't have a very clear 
statement about its meaning. 

"Shape," in a growing thing, is the result of differential rates of growth. 
Think of a growing, living organism like a cell, which starts out roughly 
circular in shape. If every part of it grows at the same rate, it is still 
roughly circular. It is not different in shape, it is just bigger. When one 
part of it grows faster than the others, however, it begins to change its 
shape. If, in an industrial organization, every department were to increase 
by 100 per cent, it would still have the same shape. However, this is not 
what happens. When the company grows (either larger or smaller), we 
usually decide: "This department can stay about the same, but this one 
over here will have to be a lot bigger." It is these unequal rates of growing 
that determine shape. Further, the differential rates of growth themselves 
vary depending on the absolute size of the organization, and then the prob- 
lem becomes interesting. 

It is not only interesting, it is important. Why do we make the decision 
whether or not a department is to be increased? The simple answer is that 
the plant will run better that way, by which we have introduced the idea 
of "function." It is this function that is at once used as the justification for 
changes in shape and as the measure of the effectiveness of the particular 
shape that the organization has taken. 

These three things — sJ7:e, shape, and function — are clearly tied together. 
We don't know just how, but the connection seems interesting and per- 
haps important. If we study them carefully, we may come up with some 
insight into the problem of organization. 

Some Common Generalizations 

What do we know about organization? As I read the textbooks on busi- 
ness organization, it seems to me that I find mostly a lot of old wives' tales, 
unverified empirically and unconnected theoretically,- that are piously re- 
peated and quoted from one author to the next. For instance, we have a 
good many pontifical statements about the span of control. It is clearly 
stated that the span of supervision is something like 20 subordinates under 
a single foreman, while the span of executive control consists of about four 


or five subordinates reporting to one top executive. These are comforting 
figures as touchstones, but each of us, in reviewing our experience, will 
immediately produce situations in which 20 workers are far too many for 
a single foreman to supervise effectively (even if we happen to be thinking 
of a pretty good foreman; if we aren't the number is very small), and will 
think of very successful organizations where many more than five subordi- 
nate executives report to a superior. 

Again, we can find statements about the size of different parts of the 
organization: "As the line grows arithmetically, the staff will grow geo- 
metrically." This is often said; and, even if it isn't said, something of the 
sort is clearly implied when we shake our heads sadly and bemoan the 
rising overhead that goes with business these days. I hesitate to ask how 
many of us would agree that as the line grows arithmetically the staff grows 
geometrically. The only empirical study that I know of suggests clearly that 
this is not so. The Bureau of Business Research at the Ohio State University 
has done a "nose count" of 211 Ohio companies employing an aggregate 
of about 40,000 people. Its findings indicate clearly that as the line grows 
arithmetically the staff tends to grow arithmetically. 

To me, these two examples seem typical. We rely on rough — and often 
erroneous — generalizations. We have to use these generalizations to make 
important decisions; so it is important to have good ones. I suggest that 
what we need to get better ones is to get better facts; and, to get better 
facts, we need to ask better questions. Better questions will flow only from 
better theory. 

Size, Shape, and Function in Man 

However, let us turn from industrial organization momentarily and ask 
how size, shape, and function are connected in living organisms. Let us 
ask, "Why are human beings shaped the way they are?" The answer is quite 
clearly because they are the size that they are. If we were either very much 
bigger or very much smaller, we wouldn't be shaped as we are. 

Usually, in Jack-the-giant-killer illustrations, the giant is 10 times as 
big as Jack, but still proportioned just as he is. If the giant were 10 times 
as big as Jack and proportioned the same way, he would be 10 times as 
tall, 10 times as broad, and 10 times as thick. His mass would be 1,000 
times Jack's — that is, 10 times 10 times 10. However, his bones would be 
only 100 times as thick in cross section — that is, 10 times as broad and 10 
times as thick. His volume has increased a thousandfold, while the cross 
section of his supporting members has only increased a hundredfold. 

Now, we know that the human bone will not support 10 times its normal 
load. If the strength of the giant's bones increases at the same rate as their 
size, they will not support his increased mass. As soon as he stands up to 
chase Jack, his leg bones will break; so Jack is perfectly safe in dealing 
with the immobilized giant. The poor giant is trapped by what is often 
called the square-cube law — the fact that as linear dimensions increase, 


surface increases according to a square function, but volume increases 
according to a cube function. The giant was rendered impotent because 
he did not have the foresight to modify his shape to suit his size. He felt 
that his shape was suitable when he was a little giant, and it ought to be 
good enough for him now. His problem had changed, however. As his mass 
increased, he should have given up the shape Jack had and developed short 
stubby legs, probably angled out a little for better support, and then he 
could have borne his increased weight. 

Size, Shape, and Function in Animals 

This connection between size and shape is not confined to Jack and the 
giant. We see it everywhere. In all animals, in general, as the mass increases, 
an increasing proportion must be devoted to the structural problem of 
supporting the increased weight. In a mouse or small bird, the bones are 
about 8 per cent of the total weight; in a dog, they are about 13 per cent; 
in a man, they become 17 or 18 per cent. When a body gets big, it must 
devote more of itself to supporting its bigness. In some cases, like the 
elephant or hippopotamus, a body becomes clumsy as well as big. 

There are real limitations on shape and function that are imposed by 
size. If an animal grows a large head, it must be supported by a neck that 
is unusually thick and strong like a bull's or very short like an elephant's. 
It is unthinkable that a giraffe could be 10 times as big and still have a long, 
slender neck; for the same reason, the height of a tree is limited by the 
point at which it will bend under its own weight. The particular shape fits 
a particular range of sizes. It is not equally effective for all sizes. 

We might stop at this point and think again of industrial organizations. 
Is it also true here? Do particular shapes (or forms of organization) fit par- 
ticular sizes? If so, do we observe this limitation? Or do we consider that 
a particular form — a particular way of setting up a staff department, for 
instance — is the ideal one and apply it, consequently, to organizations of 
all sizes? It may well be that we need to look at this relation between size, 
shape, and function a little more clearly. 

Size, Shape, and Function in Construction 

This relationship is not a unique characteristic of living organisms. The 
three factors are closely connected in the inanimate world. For instance, a 
matchstick will not bend appreciably if we support its two ends. However, 
if we produce a timber 200 times as large in every dimension — say, 2 by 2 
by 50 feet — and support it at its ends, it will begin to sag of its own weight. 
We must either make it of material different from the match or change its 
shape in order to preserve its bridging function. 

This is a general problem in building bridges. There is a real limit 
to the possible size of a simple bridge without an arch to support it. In 
general, the strength of a bridge girder increases with the size of its cross 
section. Again, the square function is applicable. Its weight, however, in- 


creases as the cube of its linear dimension, and it is clear that we can 
increase the size of the bridge until it will not support its own weight. 
Similarly, it is clear that, of two bridges of identical geometrical structure, 
the larger will be the weaker of the two since it is so heavily strained by its 
own weight. If we try to keep the same proportion among the parts and 
increase the size, the bridge is no longer able to discharge its function. 

Is this true of an industrial organization? If we keep the same shape and 
increase the size, does it become weaker by virtue of an increased load in 
carrying itself? 

The Relation of Gravity Force to Size and Shape 

Perhaps I have shown convincingly that there is, in these cases, a relation 
between these three variables, and that it is not possible to increase size 
and maintain the same shape and perform the same function. Where do 
we go from here? Let us take one more step before we turn back to indus- 
trial organizations. 

Where, in living organisms, have we been able to attain the greatest size 
with any degree of success? The whale sometimes reaches a length of more 
than 100 feet and a weight of something like 90 tons. Compared to the 
elephant, the largest living land animal, whose weight will range from 5 
to 10 tons, this is a truly prodigious animal. Why is it possible for the whale 
to grow this large? Because the whale is suspended in water and the density 
of his flesh approaches that of the water, so that his volume can increase 
without a proportionate increase in gravitational mass and the implica- 
tions of the square-cube law are not so drastic for him. Freedom from the 
force of gravity means that his size does not dictate his shape so soon, nor 
does it limit his successful functioning. This^gives us a clue to the effective 
force in determining shape by size: It is the force of gravity. For organisms 
oflrie general size of mammals, the force of gravity is the thing that deter- 
mines the relationship between size and shape. 

Let us go back to the bridge for a moment and look at the force of 
gravity. If we were to suspend a girder between two uprights, it would tend 
to sag. Further, the bending moments would increase with distance from 
each of the supports and would be greatest at the middle. If we wanted 
to support the girder, we would need to build something that would offer 
the greatest support in the middle and progressively less as we approached 
the ends. This is just what we do in the so-called tied arch or bowstring 
girder, where an arch of support curves above the bridge. The form of 
this arch is graceful and pleasing. However, its shape is not determined by 
esthetic influences but is a reproduction of the gravitational forces playing 
on it. 

To take another example — if we fix a shelf to the wall and put a weight 
on the end, it is subjected to certain bending moments. The force of these 
bending moments is greatest at the wall, the farthest distance from the 
weight; the strain is less and less as we go out along the shelf. Consequently, 


to reinforce the shelf we need a thick base near the wall and a progressively 
thinner one as we approach the end. The shape of the structure that will 
perform the function properly is a diagram of the moments of force acting 
on it. 

We do not know what forces acting on an organization may tend to 
cause it to dissolve or fail in its function. But, as we make decisions about 
strengthening and enlarging it just here and just there, we are building a 
particular shape that, if it is a good one (that is, if it allows the organiza- 
tion to function effectively), will similarly serve as a diagram of the forces 
playing on the organization. Now we shall have made some progress. We 
shall still not know what the force is, but we shall know something about 
how strong it is at different points and how its strength increases under 
certain circumstances. Realizing this, we shall have taken a real step in 
the direction of knowing the nature of the force. 

Determining the Shape of a Company 

Now, let us return to industrial organizations for a little while. What 
can we say about the shape of organizations and the things that make them 
take the shapes they do? 

The basic pressure that determines the shape of an organization comes 
from the alnounFoT work that one man can do. It is the irreducible unit 
Tor organization structure, just as the modular unit is for the architect. 
The superior in an organization is in that position because he is respon- 
sible for more work than one man can do. That is why he has subordinates. 
His job now becomes not doing the work but getting it done for him. This 
has some clear implications for the nature of leadership and also for or- 
ganization. What happens when we find that a man is responsible for 
more work than he can do? One of several things occurs. If the "more 
work" is the same kind of thing that he has always been responsible for, 
we add more subordinates. Now he can get more done, but his responsibil- 
ity has increased. This means a particular location of growth in the organ- 
ization and a particular improvement in function. 

However, this may not be the problem. Suppose the "more work" that 
has given rise to the pressure is not the production that he is responsible 
for, that the responsibility itself is more than he can do himself. Now we 
give him more subordinates, but we give the subordinates subordinates, 
so that they take some of the responsibility for supervising from him. This 
accomplishes a different end and at the same time places the growth at a 
different place in the organization. Now we have begun to increase the 
number of levels of authority. This shape will work for a much larger size, 
but it has its own drawbacks that may appear in other places. 

In still another case, let us suppose that the "more work" has led to an 
increase in neither of these but involves some kind of technical knowledge 
or special training. Instead of either adding more people at the level of 
the hourly-paid worker or setting up another layer, we set up another 


branch — perhaps a staff expert on research, advertising, or industrial rela- 
tions; or perhaps an entire office for sales and distribution, a control func- 
tion, or purchasing. Again, depending on the specific character of the force 
associated with the "more work," we have made a particular change in the 
rate of growth that has made a big difference in the shape of the organiza- 
tion, and that will ultimately make a great difference in its ability to per- 
form its function at an increased size. 

What Forces Are at Work? 

These decisions to change shape are crucial ones. We have spoken about 
the relation between size, shape, and function in animal life. Here, too, the 
decisions are crucial, but we have become used to thinking about them 
somewhat differently. If a species grows a new shape and it doesn't work, 
the species does not survive. This basic evolutionary principle is hard 
on the individual member of the species, but, in view of the long history 
of the race, it is not so bad. A business, however, is subject to the same 
evolutionary forces, and we are usually responsible for decisions regarding 
the shapes of individual members of the race. We cannot be quite as de- 
tached about the survival of the fittest and about the gain to the whole 
race at the loss of an individual. The living organism changes its shape 
willy-nilly; the business organism has some choice in the matter. In both 
cases, life may depend upon it. Consequently, it is particularly important 
for us to understand the forces that play on the institution and the implica- 
tions of particular shapes. 

The main force that determines the shape of animals and bridges and 
trees is the force of gravity. It is gravity that breaks the giant's bones and 
makes the bridges sag, and it is the whale's relative freedom from it as he 
is suspended in water that makes it possible for him to grow to such tre- 
mendous proportions. What is the equivalent force that is playing on in- 
dustrial organizations? I confess that I cannot name it or describe it at the 
moment. However, it is not an entirely dismal outlook. Hopefully, we are 
beginning to ask the right questions. Perhaps we are beginning to see the 
alternative changes in shape in organizations. Now, if we can trace the 
history of industrial organizations through a series of changes, we may be 
able to draw some real inferences about the direction and strength of the 
forces that are associated with particular pressures. In speaking of the bencl^ 
ing moments acting on a shelf, we saw that the good shelf represents, in its 
final form, a diagram of forces, since it provides support just where the 
force is strongest. Similarly, the good organization will draw a picture of 
the forces playing on it, since it will provide support just where the force 
is greatest. Thus we may not be able to name the forces yet, but we are 
within a stone's throw of being able to describe them in considerable detail. 
After that step, the name is immaterial. 


Structural Aspects of Organizing 

Although the concept of staff is quite old, it still is grossly misunderstood 
in business. For one thing, the term is used in many ways; and for an- 
other, it is further confused because two distinct types of staff exist. 

Staff here includes those activities which are supplementary to the main 
activities of the business. Too, the type of staff we will talk about is the 
specialist staff, not the general staff, 1 which is an extension of the manager 

A better understanding of the human-relations problems involved in 
the interactions of specialist staff and line is vital to optimum efficiency in 
business. And this understanding should begin with a close-up view of 
actual staff-line relationships. 

The job of the specialist staff is sometimes said to be the advising of 
other units in the business. Actually, this is only one of three types of 
relationships that can and do exist between a staff and other units. 2 These 




These three relationships are not mutually exclusive. As will be seen, a 
staff function as large as the personnel activity will usually have all three 
relationships. Neither are these relationships only with the line. A staff 
group such as purchasing buys for other staff units as well as for line units. 

Advisory Staff 

The advisory staff is a specialized counsel to management. It acts at the 
request of management to help to prepare plans, study problems, and 
reach decisions. An example is a public relations department which helps 
an executive prepare a speech. The advisory staff is to the manager the 

* Keith Davis, "Frictions in Human Relations, A Study in Staff-Line Relationships," 
Business Horizons, School of Business, Indiana University (December, 1956), pp. 44-48. 

1 The general staff is also called "personal staff" and "the staff assistant." The reader 
can find useful discussion of this staff classification in Ernest Dale, Planning and Develop- 
ing the Company Organization Structure (New York: American Management Associa- 
tion, 1952), p. 66, and in L. F. Urwick, Profitably Using the General Staff Position in 
Business, General Management Series No. 165 (New York: American Management Asso- 
ciation, 1953). ■> 

2 Paul E. Holden, L. S. Fish, and H. L. Smith, Top-Management Organization and 
Control (Stanford: Stanford University Press, 1948), Part B, Section 3. 


least troublesome of all because he is generally not compelled to consult it 
and he is not obligated to follow its advice. In the example just given if the 
manager decides to change part of the speech after public relations has 
advised him about it, he is at liberty to do so because he is the responsible 
person. However, if public relations is a control staff, the manager may not 
change his speech without public relations' approval. 

A natural result of this relationship is that. the staff is sensitive about its 
position. It feels insecure because it knows it can be "put out of business" 
unless it can convince people to use it. Since it cannot force others to seek 
its advice, it tries hard to "sell" its services, sometimes to such an extent that 
it becomes a nuisance. It feels, properly so, that it must justify its existence. 

Advisory staff is established to help the manager who needs it; however, 
if he fails to consult it, its ideas are valueless because it goes unheard. Of 
course, that is just what many managers do. In order to assure that the 
staff is heard, the doctrine of compulsory staff advice is sometimes applied 
to important problems. 3 This doctrine requires the line manager to consult 
the staff before taking action. This in no way abridges his authority. He 
still decides what action shall be taken, but at least he cannot avoid the 
advice of the group established to give it. This doctrine permits the staff 
to reduce its selling function and spend more time on its specialty; how- 
ever, it irks the manager because his decision is delayed pending advice. 
Although it is not used extensively in business, an example is the require- 
ment that a foreman consult the personnel department for policy guidance 
before he gives a worker a disciplinary suspension. The foreman makes his 
own decision, but if he does not follow his staff's advice and if his action 
gets poor results, he is in the unfortunate position of having to answer to 
his superintendent for not following the advice he received. The result is 
that he tends to follow staff advice unless he has good reason to make an 

Service Staff 

Service staff performs for the manager certain activities which have been 
separated from his job. In the true sense of the word, it performs a service. 
When a particular staff service is separated from a manager's job, he is 
then usually compelled to use the service staff, because to continue per- 
forming the work in his own department would be a duplication of func- 
tion. Many staff activities have primarily a service relationship. Examples 
are the cafeteria and the purchasing function. In the case of the latter 
example, an executive who wishes to make a purchase is required to use 
the purchasing staff. Although he has authority to specify the product, he 
does not buy it; and although he initiates the action, he does not perform 
the function. 

It is apparent that service-staff relationships are likely to cause more 

3 James D. Mooney, The Principles of Organization (New York: Harper & Bros., 1947), 
pp. 119-21. 


human-relations problems than advisory relationships, because the service 
staff restricts the scope of a manager's actions. As an example, observe the 
relations between the purchasing and production departments in a cer- 
tain factory. In this company the purchasing department buys all materials 
and services, except petty-cash items and small emergency items. The pro- 
duction organization, directed by a production manager, is the main con- 
sumer of these goods and services. It is assumed by top management that 
centralization of purchasing in one department permits better buying, 
more efficient use of materials, and over-all economies in purchasing. This 
is probably true, BUT these technical economies produce considerable 
human dislocation, as is the usual pattern. 

In the first place, the production manager and his superintendents have 
lost some of their authority. They are no longer the "big shots" that they 
used to be with vendors and their agents. Their feeling of importance is 
depreciated, and they probably receive fewer complimentary lunches and 
other favors from suppliers. On some occasions, they do not even have a 
supplier's catalog and have to go to the purchasing department to borrow 
one. Production superintendents are still permitted to talk to salesmen, 
but they must be careful that they do not, in any way, obligate the com- 
pany to purchase a particular item, because that is the purchasing depart- 
ment's function. Superintendents can go "just so far" with the salesmen, 
and then the purchasing department takes over. No one is ever quite sure 
where the line is drawn between the superintendents' function and that of 
the purchasing department. "Just so far" is a line difficult to define; con- 
sequently, bickering develops between the two. Purchasing people feel 
that superintendents sometimes "almost" obligate the firm, so they dis- 
courage suppliers from dealing personally with superintendents and try 
to tag along when they do. 

The production organization has authority to initiate purchase orders 
and, in most cases, to set product specifications. In an effort to hold more 
of their authority, production people often fix specifications to point to 
a particular supplier. Purchasing men feel that their function has been 
usurped, because they want to have a choice of two or more suppliers, and 
the bickering starts all over again. Sometimes, of course, purchasing men 
make errors in transcribing specifications onto a purchase order, which 
cause confusion, occasional shipment of an unacceptable product, and 
further complaints from the line. On other occasions, production people 
omit a necessary specification or state a wrong one. Production people, in 
self-defense, state that the error would have been caught if they had dealt 
directly with the supplier. Purchasing men counter with, "You should 
know what you are doing in the first instance." 

Frequently the production organization wants something in a hurry, 
and then it collides with the procedure. This is the system which purchas- 
ing has established for performing its service. It requires forms, time limits, 
and signatures, and it is sometimes familiarly known as "red tape." 


Procedures are inherently slow, and production men tend to chafe under 
these restrictions. Sometimes a production department inquires, "Why 
can't we get a priority?" Purchasing replies, "Your need is no greater than 
many other orders we have." Departments often feel like saying, "You 
processed so-and-so's order before you took mine," or "You didn't place 
the order soon enough to allow for normal delays in making the deadline." 
These problems arise partly because of procedural restrictions, but also 
because the purchasing organization serves many departments and, there- 
fore, has a degree of choice whether to serve one department or another 
first. Considerable behind-the-scenes negotiating occurs to determine who 
will get the quickest and best service. The purchasing director has to "play 
his cards right" to keep from displeasing line managers. 

The foregoing description of problems with the purchasing staff is multi- 
plied throughout the company by other service staffs. These problems do 
not imply that the service-staff idea in business is unsuitable, because ex- 
perience has already shown the necessity and usefulness of service staff in 
complex, functionalized business. What is needed is a better recognition 
and treatment of the human problems that result from the technical effi- 
ciencies of service-staff groups. 

Control Staff 

At first glance, the term "control staff" appears to be ill-chosen. Control 
implies to many people a command authority and since the staff usually 
does not have this authority, how does it control? Essentially, the staff con- 
trols through policy interpretations (policy control), by serving as an agent 
for a line manager (agency control), by sitting astride the chain of pro- 
cedure (procedural control), and by command authority in a narrow func- 
tional area (functional control). In other instances, it in itself does not 
actually control but it does supply the reports and interpretations by 
which higher management controls. These activities are the job of control 

The control relationship, like the service-staff relationship, is an en- 
vironment in which many human relations conflicts develop. Many con- 
trol situations give the staff a veto over line actions. It is natural for the 
line to resent this and speak of "the front-office clerks who have all the 
authority but none of the responsibility." Executives in one company are 
required to route certain expenditure requests through the controller's 
office (note that the name of this staff office is derived from the fact that it 
does control). The requests are vetoed (actually they are returned unap- 
proved) by the controller if they exceed available funds, or if he feels the 
funds were not allocated for the purpose stated in the request. Regardless 
of the propriety of this procedure, line personnel resent it. 

In another company, all credit sales by salesmen are conditional in that 
they are subject to approval by the home-office credit department. Al- 
though this procedure is quite necessary to protect the company's accounts 


receivable, a salesman who makes a sale only to lose it again because his 
client cannot get the credit is apt to feel that the credit department has 
stolen his commission. And if he fails to make his quota for the quarter, 
the credit department gets the blame. 

Other control staffs incur human-relations problems because they ac- 
complish their function by means of auditing, checking, investigating, and 
inspecting. The job of judging another person's performance or of check- 
ing performance against a standard is never a popular one, and it is made 
less so when it is done by staff. In this case, the staff is actually an "outsider" 
who sits in judgment of the performers. It does not call the plays and it 
is not directly responsible for them, but it judges them. Those who are 
audited and checked often feel that the reason they are checked is that 
higher management is suspicious of them. Thus, when an auditor arrives, 
a manager asks, "Why should he check me? I'm honest." This viewpoint is 
more than simply a manager's vivid imagination, because such staff groups 
as auditing, safety engineering, and motion study often do eye the line 
management suspiciously and try to catch it in some indiscretion. 

Factory inspection is a good example of control staff. Though an in- 
spector does not produce any goods, he determines their acceptability. If 
there is an incentive plan, his decisions usually affect earnings of employees, 
a fact which tends to increase the possibility of friction between him and 
the employees. The typical layman thinks that factory inspection is objec- 
tively done on the basis of mathematics and mechanics, but factory em- 
ployees know that it has many chances for subjective judgment. An in- 
spector can be "hard" or "easy" in dealing with employees. If he is tough 
and uncooperative, employees may become more intent on fooling him 
than maintaining quality. They will try to sneak defective work past him 
and otherwise beat him at his own game, which means that the original 
purpose of inspection — a quality product — is being negated. 

The inspector checks a physical product, but some other staffs do their 
checking by means of reports and records. This produces the interesting 
phenomenon which Gardner and Moore call "anticipation of control re- 
ports." 4 Supervisors who are judged by reports definitely want to know 
what reports go up the line and how they will be used. They try to antici- 
pate whether their department will look good or poor in the reports so 
that they may pass it on to the general foreman so that he is forewarned 
of any changes and knows how to explain them. In this way, everyone is 
ready with the right explanations when questions are asked by higher 
management. This matter of anticipating reports can lead to considerable 
informal record-keeping by the foreman. These informal records give him 
a rough picture of how the reports will look. Even though they take time 

4 See Burleigh B. Gardner and David G. Moore, Human Relations in Industry 
(3rd ed.; Homewood, Illinois: Richard D. Irwin, Inc., 1955), pp. 71-73. 


and are a duplication of effort, he considers them worthwhile because they 
help him to be ready when he deals with higher management. 

Other staffs are able to control directly by establishing certain procedures 
and schedules. In one factory, the production-control department acts in 
this way. It schedules the daily activities in each foreman's department, 
telling him just what products he will work on and what type of machine 
to use. It also routes the work-in-process to him. Although production con- 
trol has no command authority over the foreman, he follows its schedule 
as if it were an order. He recognizes that production control has an over-all 
view of operations which permits it to coordinate all factors involved and 
that variation on his part would throw the whole pattern out of adjust- 
ment and get him into trouble with his superintendent. 

Staff control by functional authority is an especially troublesome prac- 
tice. In this instance, the staff has authority to issue directions to another 
unit, which directions that unit is obligated to follow. Usually functional 
authority applies only to a small fraction of any single job, leaving the 
incumbent responsible to his regular supervisor for the remainder of the 
job. This is illustrated by the emergency authority of a safety director to 
order a man to stop working an unsafe machine without clearing the action 
with the foreman. As another example, in one multi-plant company, the 
home-office personnel director has certain functional authority over branch 
personnel directors. The branch manager exercises general on-location 
supervision of the branch personnel director, but the home-office personnel 
director has functional authority to select, hire, transfer, promote, and 
separate the branch personnel director. 

The principal defect of staff control by functional authority is that unity 
of command is violated in that two persons are responsible for a particular 
job, and consequently, jurisdictional conflict tends to arise. Even if the 
jurisdiction of each is crystal clear, the person who has the principal re- 
sponsibility often feels that his effectiveness is being hampered by the func- 
tional actions of the second person. In any case, the employee who is 
controlled has two supervisors to please, and he is likely to be confused 
regarding when the authority of each applies. 


It is apparent that a full understanding of staff relationships by both 
staff and line is necessary if the full potential of the staff is to be realized. 
This understanding is difficult to achieve because staff-line relations are 
one of the most complicated human relationships in all of business. Most 
companies need to devote more attention to this matter, because it is 
usually not in the "kit of tools" of men when they are employed. 



Can executives effectively supervise more tJian five people 1 ? It is argued 
here that they can, and that the principle of span of control is no longer 
valid, particularly as applied to our larger government agencies and business 
corporations. "The institutionalization of the organization and the develop- 
ment of primary relationships among the members of the executive group 
together provide such a high degree of control that the area of effective 
supervision of the chief executive is much wider than that predicted by the 
span of control principle." 

One of the basic doctrines in the theory of organization is the principle 
of the limited span of control of the executive. The ability, capacity, and 
time of the executive are necessarily restricted by biological and physical 
factors. Therefore, if the number of subordinates reporting to the execu- 
tive is kept to a minimum, the quality of coordination is better than if 
some larger number of subordinates is supervised. 

The size of the organization itself is limited by the fact that, in a hier- 
archical organization, an increase in scalar levels, or sub-maximization 
centers, expands the number of organization offices through which com- 
munications must move in order to arrive at an authoritative decision. 
This proliferation of "red tape" in turn renders the organization less effi- 
cient and effective than at some supposedly smaller, and more optimum, 
size. This paradox between the limited span of control principle and the 
principle of excessive scalar levels has been pointed out by Simon. 1 An 
increase in the number of subordinates reporting to each executive does 
not solve the problem of excessive hierarchical levels because the span of 
control limitation makes for less efficient operations. 

If both principles are actually applicable to the large organization, then 
it must follow that many large government agencies and business corpora- 
tions are less efficient than their smaller counterparts. However, large cor- 
porations not only continue to grow in size but also comparisons of various 
sizes of corporations are not convincing as to the superiority of smaller, as 
opposed to larger, corporations. Such scale comparisons can not be made 
among government agencies because no dollar value can be assigned to 
output. However, administrative techniques in both business and govern- 
ment are similar enough that one can argue what holds true in the one 
also applies in the other. At least, in neither case, does the span of control 

* Waino W. Suojanen, "The Span of Control — Fact or Fable," Advanced Management 
Vol. XX, No. 11 (November, 1955), pp. 5-13. 

l Herbert Simon, Administrative Behavior (New York: Macmillan Co., 1948), p. 26; 
"The Proverbs of Administration," Public Administration Review, Vol. VI (1946), pp. 


appear to have set a limit to the actual size of the organization. Rather, 
the size of the typical organization has increased with the increasing com- 
plexity of the problems to be solved. There is no evidence to indicate that 
in our contemporary society the span of control has ever served to restrict 
size although declarations of its universal applicability are encountered 
time and again both in theory and practice. 

The theoretical justification for the restricted span of control was de- 
veloped by Graicunas and Davis. 2 Graicunas identifies and classifies three 
types of interpersonal relationships in the unit organization. If the number 
of subordinates reporting to a common superior is n, then the number of 
direct single relationships is also equal to n. Cross relationships are those 
that involve interactions between any two subordinates and the superior; 
the number of possible cross relationships that can occur is given by the 
formula n{n — 1). Direct group relationships are essentially a combination 
of direct single relationships and cross relationships; they are direct in the 
sense that they can be classified from the point of view of any participant 
as a member of a group in contact with the superior; they are cross relation- 
ships in that they can be classified as contacts between the superior and a 
group of two or more subordinates. The number of possible direct group 

n(2 n — 1) 
relationships is given by the formula v ^ -. The direct group relation- 
ships increase geometrically, and it is for this reason, that they occupy a 
strategic role in Graicunas' hypothesis of the limited span of control. 3 

Span of Executive Control 

Davis further amplifies the Graicunas hypothesis by distinguishing two 
qualitative levels of supervision. The first level is the unit of supervision. 
The unit of supervision applies to the first-line supervisor. Activities, at 
this level, are mostly physical and are mainly concerned with control of 
current operations. The relative absence of mental activity permits a wide 
span of control with the optimum ranging from 15 to 20 people. 

The span of executive control, according to Davis, applies to all execu- 
tives above the level of the first-line supervisor. It is narrower because 
executives are concerned more with planning and organizing activities. 
Since this type of work is largely mental and deals with intangibles and 
abstractions, it is much more exacting and demanding than physical ac- 
tivity. As a result, the executive can not effectively supervise more than 

2 V. A. Graicunas, "Relationship in Organization," Papers on the Science of Admin- 
istration, ed. L. Gulick and L. Urwick, (New York: Columbia University, 1947), pp. 
183-87; and Ralph C. Davis, The Influence of the Unit of Supervision and the Span of 
Executive on the Economy of Line Organization Structure, Bureau of Research, Research 
Monograph No. 26 (Columbus: The Ohio State University, 1941). 

3 In his discussion of Figures 1 and 2, ibid., p. 186, the following statement appears, 
"Note that for four subordinates it is quite easy to grasp and remember every com- 
bination of groups, but that from five on, this is no longer possible, because the 
various groups become a maze of confusion." 


three to seven first-line supervisors or subordinate executives. Davis indi- 
cates that the optimum span of executive control is, in most cases, limited 
to not more than five people. 

To the knowledge of the writer, there is no evidence to indicate that 
the span of control principle has ever been the subject of empirical testing. 
Nonetheless, both of the hypotheses described above have been accepted 
in administrative theory as valid principles of organization. If the limits 
of the span of control are as rigorous in practice as in theory, then it would 
seem to follow that exceeding these limits would seldom occur in practice. 
In other words, if the system of governance in the bureaucratic organization 
is rationally planned and executed, and if there is a tendency for the ex- 
ecutive span of control restraint to limit the coordinating ability of the 
executive beyond four or five subordinates, then it would follow that few 
successful organizations would have more than four people reporting to 
any executive within the hierarchy. Further, it would also seem reasonable 
to assume that the number of people reporting to the chief executive would 
tend to approximate the theoretical ideal very closely because, at executive 
levels, nearly all activity is concerned with the abstract and the intangible. 

A recently completed research study has made available information on 
the number of executives reporting to the president in 100 large companies 
(over 5,000 employees). 4 One of the major conclusions of this study is that 
the theoretical limits of the executive span of control are in practice more 
often violated than they are observed as indicated in Table I. In addition, 
the top leadership of large corporations appears to have "widespread com- 
plaints about the validity of the theory of span of control." According to 
this study, all of the firms included in Table I were "known to have good 
management practices." Assuming that the maximum number of subordi- 
nates that can effectively be supervised by one executive is four (the number 
mentioned by Graicunas), then only ten per cent of the firms included in 
Table I have effective supervision at the level of the supreme coordinating 
authority. But, if all the firms included in the sample were known to have 
"good management practices," then doubts are raised as to the validity of 
the Graicunas and Davis hypotheses. This is especially significant in view 
of the fact that the median number of executives reporting to the president 
in the study was between eight and nine, or roughly twice as high as the 
indicated limit, and that the presidents of twenty-four firms in the total 
sample of one hundred had thirteen or more subordinates reporting di- 
rectly to them. 

Careful studies made of the work habits of corporation presidents in 
Sweden indicate that they spend only 56 per cent of their time inside the 
firm and 44 per cent of their time outside the firm. 5 

Many American executives do devote a considerable amount of time to 

4 Ernest Dale, Planning and Developing the Company Organization Structure, Re- 
search Report No. 20 (New York: American Management Association, 1952). 

5 Sune Carlson, Executive Behaviour: A Study of the Work Load and the Working 
Methods of Managing Directors, (Stockholm: C. A. Stromberg Aktiebolag, 1951), p. 62. 



these matters also, and, to the extent that this occurs, it results in the ex- 
ecutive concerned being able to spend only part of his time in coordinating 
the internal affairs of the organization. Insofar as the presidents of the 
corporations included in the American Management Association study 
spend only part of their available time inside the organization, their span 
of control is understated. Furthermore, in any large organization, a number 
of people, who are members of the organization, but do not report directly 
and formally to executives have access to him — whenever this occurs, the 
span of control of the executive in question may again be understated. 6 

Total Theoretical 

Direct and Cross 

























Sources: Columns (1) and (2) are from Ernest Dale, op. cit., p. 57; Column (3) is from 
V. A. Graicunas, op. cit., p. 186. (Relationships beyond 12 subordinates have been com- 
puted according to Graicunas' formulas.) 

The American Management Association study is significant for another 
reason. In six of the corporations covered in the study, only one executive 
reports to the president. In firms in which this is the case, it is plausible 


Number of 

Executives Reporting tc 


(OVER 5,000 

f umber of Executives 

Reporting to 

Number of 



















































6 An interesting illustration of this occurs in the following quotation: "General 
Eisenhower told me in an interview that in World War I he had at one time 150 
battalion commanders reporting to him. This he believed, resulted in cleaner under- 
standing up and down the line, an opportunity for personal inspiration, and a 
chance to voice complaints. Now it would be physically quite difficult even to receive 
reports from 150 people or, to express it in organizational language, 'effectively supervise' 
so many people. What the General had in mind is that accessibility to the chief execu- 
tive can make important contributions. The number of people he supervised was small, 
while the number who had access to him was large." Ernest Dale, "Dynamics and 
Mechanics of Organization" in Organization Planning and Management Development, 
Personnel Series No. 141, (New York: American Management Association, 1951), pp. 7-8. 


to assume that the planning function is largely the responsibility of the 
president and that the procedural-executory plan is the responsibility of 
this particular subordinate whatever his title may be. Functionalization 
of this type is an explicit recognition that the elements of coordination 
can be segmented and different members of the leadership assigned the 
duties of supervising them. In a theoretical sense, this segmentation is 
nothing but the division of the organizational objectives into a substantive, 
or policy formulating, plan and a procedural-executory, or administrative, 
plan. This device, which is implicit in Davis, acts to expand the area over 
which the top management can supervise effectively and efficiently. At the 
same time, however, if the supreme coordinating authority of the organiza- 
tion can be segmented doubts are raised as to the operational validity of 
another basic principle of organization theory, that of the principle of 
"unity of command." In a sense, both the principle of the limited span 
of executive control and that of the principle of unity of command were 
originally developed in the military and then adopted as governing in 
large-scale organizations in government arid in the business world. 

Unity of Command 

The mission of a military organization is in abeyance during time of 
peace and is operative only in time of war. The continuity of the military 
organization is provided by a hard core of elite but in time of war this 
hard core must be expanded many fold in order "to defeat the main force 
of the enemy and to seize his vitals." The process of expansion of the 
military, at least in most Western countries, requires that highly individ- 
ualistic and yet ordinary manpower be recruited, trained, and developed 
into operating units during a period of emergency when time is a factor 
in short supply. The span of control under these circumstances is neces- 
sarily limited because the nature of military operations is such that the 
physical movements of individuals must be constantly integrated into the 
objective of the organization. At the same time, unity of command is neces- 
sary because the individual may be ordered by the leadership to sacrifice 
himself as an individual to further the organization objective; this requires 
instant obedience to one, and only one, superior. Newly created posts 
within the leadership must largely be filled by the more outstanding among 
the recruits and the marginal principle applied to the utilization of the 
hard core elite. To speak of a limited span of control and the unity of 
command in this type of an organization is to recognize that armies con- 
sist of only a small nucleus of professionals and a vast multitude of ama- 
teurs — the principles that govern the organization apply to active opera- 
tions and are concerned with an ad hoc effort, not with a steady, continuous 

Variable Span of Control 

Contrast the nature of the mission of the military organization with that 
of the organization in which most of the elements of the substantive plan 


unfold as a result of deliberate planning internally generated rather than 
being dependent upon the unknown plans of an unknown enemy. The 
significant element here is that planning possesses a far higher degree of 
predictability within the framework of a supreme coordinating authority 
than when two or more organizations, each with its own coordinating 
authority, confront each other as opponents. The internal structure of the 
organization is conditioned by the environment in which it operates; the 
principles that govern its procedural-executory plan are largely a product 
of this external situation. It can be stated almost categorically that the 
span of control in an organization geared to operate during periods of 
emergency is much narrower than it is in an organization in which pre- 
dictable standards can be established and where the variances from these 
standards then serve as the basis for corrective action. 

There is a tendency in the military for the span of control to widen in 
time of peace — this is a result of the same circumstances that cause the 
layman to think of firemen as being pinochle players primarily and fire 
fighters secondarily. 

"Pride of place" has usually won out in time of peace, resulting in far more 
individuals reporting to one man than he could control. Where there are am- 
bitious subordinates, softhearted commanders, and complaisance characteristic of 
peacetime, "pride of place" flourishes. The awakening always comes but usually 
not until war or other emergency threatens. Then serious incidents in the form 
of grave errors, neglects, or delays forcibly remind commanders of the limitations 
imposed upon them by "span of control." And then, a commander realizes that 
as the number of subordinates reporting directly to him has become greater, the 
number of resulting relationships has increased not by arithmetical but by geo- 
metrical progression. It is this total number of relationships in a headquarters 
which in a large part determined the complexity of command and the difficulty 
of coordination. With a General Staff, the commander's capacity for managing a 
large number of subordinates is greatly extended, but even so the limitations of 
"span of control" persist." 

Peacetime Span Widens 

Pride of place, as defined above, is but the peacetime equivalent of the 
wartime span of control. The organization of the Army, with its large 
number of scalar levels and a limited span of control, is ideally adapted 
to "closing with the enemy and seizing his vitals." In peacetime, the mili- 
tary is both an organization and an organization in being, just as the fire 
department is performing its organization objective when it is fighting 
fires. In this context, the quotation above should not be interpreted as 
referring to relationships increasing geometrically but rather as the renais- 
sance of the organization objective which changes the nature of the re- 
lationships themselves. The expansion of the organization immediately 
changes the nature of the duties performed by each and every member of 
the professional leadership — their scarce knowledge must be allocated to 
the most pressing ends and it is out of this rapid transition that the "com- 

7 Otto L. Nelson, National Security and the General Staff (Washington, D.C.: Infantry 
Journal Press, 1946), p. 579. 


plexities of command" and the "difficulties of coordination" arise. Into 
this milieu are integrated, in a more or less systematic manner, the enlisted 
and quasi-military, non-professional leadership with values formed in the 
world of private associations where drastic change is the exception rather 
than the rule. 

The concept of the limited span of control, developed and verified by 
the military, was one of the first principles borrowed from them by theo- 
rists in public and private administration and applied to non-military 
organizations. The principle itself was intuitively acceptable and served 
as a good first approximation in the formation of large, non-military or- 
ganizations. The basic error that was committed in adapting to non-mili- 
tary situations arose from an improper appreciation of the contrast between 
active military, as opposed to civil, operations. The element of uncertainty 
in military operations is much greater than it is in civil operations whether 
the focus is on the quiescent stages characteristic of peacetime when the 
coalitions are being formed or during the active wartime phase when every 
plan that is developed is subject to rapid change because of a change in 
the plans of the enemy. The large-scale, non-military organization, in con- 
trast to this, can reduce most of its operations to a routine requiring a 
minimum of detailed direction. 

The mechanistic concept of the limited span of control was advanced 
before social scientists had become aware of the importance of primary 
relationships and the role that they play in the formal organization. Every 
formal organization can, and should be, also envisioned as a series of 
primary groups rather than being composed solely of isolated individuals. 
No matter what the purposes of the organization, this tendency of people 
to become members of informal groups is always at work. Mere physical 
proximity of people to one another is enough to bring these informal 
groups into existence. The successful leader recognizes this fact and utilizes 
it to improve the quality and quantity of coordination. Leadership ulti- j 
mately is more dependent on these social relationships to attain the organ- 
izational objectives than on power that grows out of authority. „ / 

The Role of the Primary Group 

When an organization is initially created, it can be said that the organ- 
ization is based upon contemporaneous cooperation. Contemporaneous co- 
operation changes into progressive cooperation under the influence of time 
and growth — this means that the character of the relations among the 
members of each unit organization changes from secondary to primary in 
greater or lesser degree. The responses of the members of the unit organiza- 
is dependent on admission as a whole or total person and occurs only after 
a period of probation. The problems of coordination of the formal organ- 
tion toward each other become total rather than segmental in nature; the 
contractual relations which are characteristic attributes of a system of 
contemporaneous cooperation are supplanted by a diffuse, rather than a 


specific system of progressive cooperation. The nature of communication 
within the group becomes deep and extensive to the point that the unit 
organization can be said to behave as a single person. As the process con- 
tinues, each individual receives more than a share of the product; he also 
obtains personal satisfactions which, in effect, can be numbered among 
the inducements and the incentives that the organization provides to par- 
ticipants. The primary relations act to harmonize the organization objec- 
tive and the personal objectives of the participants and in this fashion the 
job of the management can be said to be lightened since participation in 
the system of conscious cooperation is no longer dependent upon pecuniary 
inducements alone. 

The unit organization comes into being, as a component of a larger, 
formal organization, "when (1) there are persons able to cooperate w r ith 
each other, (2) who are willing to contribute action, (3) to accomplish a 
common purpose." 8 One obvious aspect of the phenomenon of growth is 
an increase in the "nest of Chinese blocks," or unit organizations, that 
constitute the formal organization. An even more important aspect of 
growth, and its accompanying increase in differentiation and specialization 
of contributors, is its impact upon the people who constitute the unit or- 
ganizations. This facet of growth can be termed an efficiency of scale of 
organization since it operates to bring together people of a similar back- 
ground into a specialized unit organization. 

The process of selection of the membership of the specialized unit organ- 
ization tends to become institutionalized in that recruitment is limited to 
people with the requisite skills acquired through a common or similar 
education. 9 On the one extreme, this uniqueness is assured by the estab- 
lishment and maintenance of special schools and seminaries operated un- 
der the control of the leadership of the organization; they serve both as 
means of developing primary relations through the inculcation of common 
value systems and as means of insuring the perpetual succession of the 
leadership function. On the other hand, a similar educational background 
often serves the same purpose as far as the unit organization is concerned — 
the recruit is accepted because he possesses the requisite training and this 
is assumed to provide the necessary motivation and loyalty. Initiation is 
dependent on certain formal attributes which can be analyzed as con- 
stituting the skills required to fill a certain organization office; acceptance 
ization are reduced by the employment of the unit organization as the basic 
component of the formal organization. Communication, willingness to 
serve, and the organization objective are all more easily accomplished once 
the organization's strategic role is recognized. 

8 C. I. Barnard, The Functions of the Executive (Cambridge: Harvard University 
Press, 1938), p. 82. 

9 Cf., R. Bendix, Higher Civil Servants in American Society (Boulder: University of 
Colorado Press, 1949). This is a penetrating "study of the social origins, the careers, and 
the power-position of higher federal administrators." 


Less Work for Executives 

The unit organization provides the framework in which secondary, con- 
tractual relations become socialized and develop into primary relations. 
Primary relations, in turn, result in the development of primary groups; 
the primary group has some vaguely defined upper limit, and if it is to be 
used as a tool to aid the leadership to maintain the system of conscious 
cooperation, then the unit organization should also be limited in the num- 
ber of members to be included in it. Note, however, that this limit is not 
as rigorous as that established in the Graicunas-Davis hypothesis. Rather 
than resulting in increased demands on the time of the superior, informal 
grouping reduces rather than increases the number of cross and indirect 
group relationships that the superior must consider. If the executive group 
is small and composed of congenial and like-minded persons, it can be 
said to function as the alter ego of the chief executive. A small, compact 
and intimate group will require less coordination of its own coordinat- 
ing activities by the chief executive than a large and motley array of 

The principle of the limited span of control is valid only if it is granted 
that the limits to be the size of a system of cooperation are ultimately de- 
pendent upon the capacities of one individual. This assumption itself is 
paradoxical because it implies that coordination, however denned, can 
only be the product, in the last analysis, of the abilities and knowledge 
of that individual. This in turn hinges largely on Western beliefs about 
individualism — but need there be any more reason to believe that systems 
of cooperation depend upon individual abilities than to believe that they 
are not even possible because individuals are individuals and will always 
behave as such? It can be argued, and is in many of the social sciences, that 
human behavior is as much communal as it is individual; if this is granted 
then it can also be argued that supreme coordinating authority can be 
vested in a group as well as it can in an individual. In turn, if the group 
concept is admitted, much of current theorizing about the optimum size 
of the formal organization requires re-examination. "Either because the 
scientific knowledge of human relationships is not available (which in the 
past has been to a certain degree the case), or because of failure to apply 
scientific knowledge which has been developed (which is more nearly the 
contemporary situation), scientific management fails on at least one count 
to be adequately scientific." 10 

Group Coordination 

The formal organization by virtue of its existence must have a supreme 
coordinating authority — and if experience has any lessons, it is that the 

10 William E. Moore, Industrial Relations and the Social Order (New York: Mac- 
millan Co., 1946), p. 187. 


source of the authority should be centralized. This, however, need not, and 
does not, imply that authority must be vested in a single individual, except 
to define the responsibility for results; it merely implies that the substan- 
tive plan developed by the leadership is accepted as the basis for action 
within the organization without question on the part of those participants 
subject to the authority of the organization. Given this frame of reference, 
the span of control is not given by a mere counting of arithmetical and 
geometrical progressions and assuming that when some limit is reached 
that coordination ceases to be effective. Theoretical relationships, such as 
those developed by Graicunas and Davis, posit either a system of con- 
tinuous conflict or of detailed control of the individuals comprising the 
organization rather than a system of continuing cooperation. If the system 
of authority does not serve its function, then the Graicunas-Davis limits 
are relevant since they indicate the maximum of possible exceptions that 
may require a decision on the part of the superior. 

If, however, informal groups can serve as a means of facilitating coordi- 
nation at the operative level, then the apparent escape from the dilemma 
of the limited span of control is the argument that if the supreme coordi- 
nating authority can have its locus in a group, rather than a single in- 
dividual, it becomes indefinitely extensible. If this is the case, there is no 
limit to the size of any one formal organization since the "factor of co- 
ordination" is then in elastic supply to the organization and can be ex- 
panded to meet needs of the organization occasioned by increased size. In 
one sense, this is the purpose served by the hierarchical, or military organ- 
ization. The division of the common purpose of the organization into a 
substantive plan and a procedural-executory plan also serves to meet this 
purpose. Such structural and philosophical devices, however, supposedly 
collide with the principle of unity of command; "In building a structure 
of coordination, it is often tempting to set up more than one boss for a 
man who is doing work which has more than one relationship. . . . The 
rigid adherence to the principle of unity of command may have its ab- 
surdities; these are, however, unimportant in comparison with the cer- 
tainty of confusion, inefficiency and irresponsibility which arise from the 
violation of this principle." 11 

The concept of a single person as the supreme coordinating authority 
in a system of conscious cooperation was first enunciated by Louis IX — it 
includes "promptness of decision, unity of command and strictness of dis- 
cipline." 12 As is true with many of the principles of administration, the 
empirical evidence that the principles of unity of command depends upon 
one person as the locus of the supreme coordinating authority, is extremely 
scarce. There is no question that formal organizations, and most informal 
organizations, possess authority by virtue of their existence — but the argu- 

11 L. Gulick, Papers of the Science of Administration, op. cit., p. 9. 

12 Robert Michels, Political Parties, trans. E. and C. Paul (Glencoe, Illinois: The 
Free Press, 1949), p. 41. 


ment that all decisions depend ultimately on the decisions of one person 
is difficult to support on any logical basis. 

Command in the Family? 

The basic unit organization in modern American society is the family, 
which by its very nature, cannot possess a supreme coordinating authority 
resting in one person. Yet household decisions are made and quantitatively 
constitute the most important decisions in society. The nature of the family 
is such that "in general, the more detailed regulation of the kinship sys- 
tem is left for diffuse cultural standardization, not enforced by a formal 
social organization." 13 Household decisions, due to the cultural nature of 
the family, are made by various members singly, or are joint decisions, and 
are translated into action without being channeled through a higher au- 
thority. Custom and tradition largely delineate the area in which the hus- 
band and wife (and other members) make decisions. 14 

The family shows every evidence of enduring as the basic unit organiza- 
tion of society; can it also be considered as an exception to the principle 
of unity of command? At one time the family constituted the unit or- 
ganization in production — did it suffer in efficiency from a lack of unity 
of command? Or is the principle only operative where the relations of 
the participants to one another are secondary rather than primary, i.e., is 
applicable only to those organizations whose operations are conducted 
rationally (formal organizations)? It can, of course, be argued that family 
decisions considered individually are confused, inefficient and irresponsi- 
ble but that they are rational in the aggregate. Or, the argument can be 
advanced that the purpose behind a continuing family relationship is the 
preservation of the organization and that the decisions made in the house- 
hold are weighted as to the effect they have on this objective. From this, it 
follows that the family can be considered as having both a substantive and 
procedural-executory plan very similar to that of the formal organization. 
Because the family is usually limited in size and its members are not highly 
specialized, coordination is obtained largely through informal means. In 
other words, where the primary group relationships are present the organ- 
ization can be said to act as one person. 

13 Robin M. Williams, Jr., American Society (New York: Alfred A. Knopf, Inc., 1952), 
p. 45. 

14 Cf., Williams, ibid., p. 56, for the following discussion of the decision-making 
process in the typical family: "For any aggregate of persons becomes a real social group 
only by being identified as a unit, by sharing a common set of experiences, and hence 
by sharing a common universe of meanings and symbols. . . . Not even in theory is the 
wife expected to render unquestioning obedience to her husband, much less in actual 
practice. The marriage relationship most commonly held up as a model is one in 
which joint decisions are reached. It remains true that general consensus still holds 
that in the last resort the husband should be 'head of the house', but it is felt that 
only in rare circumstances will 'patriarchal' rather than 'democratic' processes be 


Group Authority Basic 

From the analogy to the family, the supreme coordinating authority 
can be regarded as existing in either a single individual or in a group of 
people. This, in turn, indicates that there are two ways of analyzing au- 
thority. It can be regarded as having its locus in a single individual; this 
can be described as the technical or formal concept of organization such 
as is typically conveyed to the mind in military organization; relations 
among members are secondary, associational, Gesellschaft. The other is to 
analyze authority from the primary, communal, Gemeinschaft approach; 
"where the members of a social aggregate hold ultimate convictions in 
common, there is a cohesion capable of overriding otherwise disruptive 
conflicts over scarce means-values." 15 This is the alter ego concept of the 
executive group; coordination does not depend solely upon one individual 
but is shared in much the same manner as in the household situation. In- 
dividual value systems are similar and membership in the executive group 
is really a projection of the personality of the peak coordinator; coordi- 
nation is a product of group action. 16 

Implicit in the "executive group" concept are a number of interesting 
hypotheses which can not be explored in detail here. If it is granted that 
coordination can be secured as the result of group activity, then the tradi- 
tional principle of the span of control as a factor limiting the size of the 
organization requires careful re-evaluation. One of the fundamental ad- 
vantages of the large, formal organization, if the executive group concept 
is valid, is the replacement of the single individual as the supreme coordi- 
nating authority by a group. 17 To the extent that the formal group de- 

15 Williams, ibid., p. 343. 

16 R. A. Gordon, Business Leadership in the Large Corporation (Washington D.C.: 
The Brookings Institution, 1945), pp. 317-18, who makes the following statement about 
the character of coordination in commercial organization; "When we speak of the 'execu- 
tive group', the second of these two words needs to be stressed. The chief executive 
is the most important single figure in the large corporation, but he is only one of a 
sizable body of professional managers who individually and collectively make the 
decisions and provide the coordination that gives unity and direction to the firm's 

i" The concept of the executive group as the supreme coordinating authority of 
the large organization is best embodied in the General Staff concept. The following 
quotation from Major General Otto L. Nelson, op. cit., p. 573, expresses current Depart- 
ment of the Defense doctrine about the role of the General Staff: "Thus, while the 
General Staff does not absorb any of the prerogatives of command, it owes its existence 
to the fact that size and complexity of organization and the problems resulting make 
it physically impossible for any one person to do all the planning, coordinating, and 
supervising indispensable to intelligent command. To perform these tasks the com- 
mander of any large unit must have a General Staff which as a body acts as his alter ego, 
greatly enlarging his capacity to command but without taking away from him any of 
his attributes of command. Thus, the military doctrine constantly emphasizes the fact 
that the General Staff officer has no right of command. Considering the General Staff 
to be the commander's alter ego does not preclude sensible specialization on the part 
of its component parts. Thus, there can be and there is considerable specialization in 
the performance by the War Department General Staff of its tasks of planning, co- 
ordinating, and supervising." 


velopes primary relations among the members problems of coordination 
will be further minimized. 18 From this point of view, the large organization 
can be characterized as a more efficient administrative structure than the 
small organization that is oriented around a single individual. At the very 
least, the traditional definition of coordination as an ambivalent concept- 
division of labor is posited as the basic factor in social progress, while, at 
the same time, the intimate coordination that makes division of labor pos- 
sible is held to depend upon certain strategically placed individuals. 

Contradictory Principles 

The development of large-scale organizations has followed an historical 
pattern of continuing experimentation with structures and procedures to 
cope with the problems engendered by increasing size and attempting to 
insure the survival of the organization. Leadership in the technical and 
procedural aspects of organization was transferred from the non-profit 
organization to the commercial organization as a result of the "scientific 
management" movement which dates back roughly to the turn of the cen- 
tury whereas the leadership in the sociological aspects of organization has 
remained with the non-profit organization. The theory of organization 
that has developed has not been built around any general frame of refer- 
ence but has rather emerged as a series of principles of administration. 19 
Many of these principles contradict each other and have never been verified 
in any empirical way. Administrators have applied those principles that 
were applicable to their own particular situation ignoring those that were 
contradictory to the ones applied. 

Despite the arguments of organization theorists, there is as yet no in- 
tegrated body of theory because the "sciences" of organization and admin- 
istration can be approached from any number of directions. Even a pre- 
liminary survey of the literature would require an extensive exploration 
and integration of such varied areas as anthropology, business administra- 
tion, economics, education, history, law, philosophy, political science, psy- 
chology, and sociology. Such a task is beyond the "span of control" of any 
one individual. As a result, much of the theory of administration and 
organization is still in a very rudimentary stage of development and the 
results of research in one field are often opposed to the results discovered 
in others. In practice, however, the leadership of an organization is con- 
fronted by an organization objective and has to mold around it a structure 
and a procedure. With the increase in the size of organization, "rational 
experimentation with new methods" has been the practice — procedures 

18 In contrasting capitalism with state socialism the following point is developed 
by S. A. Lewisohn, Hainan Leadership in Industry (New York: Harper & Bros., 1945), 
p. 19; "In any particular enterprise a group is given a free hand to initiate, plan and 
execute. In forming such groups, individuals are able to find congenial and like-minded 
partners. . . ." 

19 In Alvin Brown Organization of Industry (New York: Prentice-Hall, Inc., 1947), 
pp. 1-8, there are listed 96 "principles" of organization. 


and structures have been adapted to the requirements of the situation em- 
ploying those principles that carried the most weight. 

The reason why organization theory is a compound of so many paradoxes 
arises from the historical development of the social sciences. On the one 
hand, in many of the social sciences the importance of the individual has 
been stressed — in economics it appears as "economic individualism." The 
division of labor results in specialization and the latter permits the individ- 
ual to channel his abilities in whatever direction his desires may lie: "It 
is not enough simply to note the fact that specialization is rampant in our 
society. We must note also the fact that in general it is believed in as a 
positive good." 20 

Integration versus Specialization 

Opposed to the principle of specialization or differentiation in the or- 
ganization is that of integration. The simpler the organization the easier 
it is to obtain coordination, yet the imperatives of survival and growth 
demand the use of the large organization: "the extent of useful division 
of labor is intimately related to the size of the establishment or complexity 
of the industry as a whole. Thus, as a general rule, the larger the concern, 
the greater the possible degree of specialization." 21 As the degree of spe- 
cialization increases, common values are held to result in the splintering 
of the unit organization. Primary relationships tend to disappear and this, 
it is argued, mitigates against the usefulness of a continued differentiation 
of function. 

The leadership of the non-commercial organization does not have re- 
course to the alternative of the market place as the basis for the construc- 
tion of a system of coordination. The system of coordination must base its 
sole reliance on a structure and a procedure to implement the organization 
objectives. In order to establish and maintain authority, the leadership of 
the organization will order the structure and the procedure so that it 
possesses the quality of predictability. Without predictability there can 
be no coordination and without the latter the "system of governance" 
perishes. The dichotomy of specialization versus integration is not solved 
by seeking an optimum size of the organization; rather rational techniques 
and structures are sought which will permit efficient expansion. 

Span of Control Invalid 

The gist of the argument advanced here is that the span of control is no 
longer a valid principle of organization in view of the advances that have 
occurred in those social sciences that relate directly to administrative 
theory. The emergence of the primary group concept leads logically to 
group coordination. The role of the chief executive becomes one of secur- 
ing cooperation in the pursuit of the organization objectives, i.e., he co- 

20 w. E. Moore, op. cit., p. 65. 

21 Ibid, p. 64. 


ordinates the efforts of the coordinating group. However, the institutional- 
ization of the organization and the development of primary relationships 
among the members of the executive group together provide such a high 
degree of control that the area of effective supervision of the chief execu- 
tive is much wider than that predicted by the span of control principle. 22 
Due to limitations of space, we have not attempted herein to develop 
the theories of permissive authority and substantive decentralization which 
are closely related to the concept of group coordination. Substantive decen- 
tralization is defined in its application to the commercial organization as a 
return for control purposes to the price mechanism with the efficiency of 
the substantively decentralized divisions measured on a profit and loss 
accountability basis. In the non-commercial organization, substantive de- 
centralization is probably dependent on the adoption of a system of per- 
formance budgeting. In a later analysis, an attempt will be made to relate 
the widened span of control to the theories of permissive authority and 
substantive decentralization. 

22 For additional evidence on this point, cf. C. L. Shartle, "Leadership and Execu- 
tive Performance," Personnel (March, 1949), pp. 370-80; John M. Pfiffner, "The Third 
Dimension of Organization," Personnel (March, 1952), pp. 391-99 and James C. Worthy, 
"Organizational Structure and Employee Morale," American Sociological Review (April, 
1950), pp. 169-79. 

The Informal Organization 



It is a matter of general observation and experience that persons are 
frequently in contact and interact with each other when their relation- 
ships are not a part of or governed by any formal organization. The magni- 
tude of the numbers involved varies from two persons to that of a large 
mob or crowd. The characteristic of these contacts or interactions is that 
they occur and continue or are repeated without any specific conscious 
(joint) purpose. The contact may be accidental, or incidental to organized 
activities, or arise from some personal desire or gregarious instinct; it may 
be friendly or hostile. But whatever the origins, the fact of such contacts, 

* Chester I. Barnard, The Functions of the Executive (Cambridge, Mass.; Harvard 
University Press, 1951), pp. 114-23. 


interactions, or groupings changes the experience, knowledge, attitudes, 
and emotions of the individuals affected. Sometimes we are aware of the 
fact that our emotions are affected, for example, by being in a crowd; more 
often we observe effects of such relationships in others; still more fre- 
quently we are not aware of any permanent effects either in ourselves or 
in others by direct observation. But we nevertheless currently show that 
we infer such effects by using the phrase "mob psychology," by recognizing 
imitation and emulation, by understanding that there are certain atti- 
tudes commonly held, and very often by our use of the phrases "consensus 
of opinion" and "public opinion." The persistence of such effects is em- 
bodied in "states of mind" and habits of action which indicate the capaci- 
ties of memory, experience, and social conditioning. As a result of these 
capacities some of the effects of contacts of persons with limited numbers 
of persons can spread through very large numbers in a sort of endless 
chain of interaction over wide territories and through long periods of time. 

By informal organization I mean the aggregate of the personal contacts 
and interactions and the associated groupings of people that I have just 
described. Though common or joint purposes are excluded by definition, 
common or joint results of important character nevertheless come from 
such organization. 

Now it is evident from this description that informal organization is 
indefinite and rather structureless, and has no definite subdivision. It may 
be regarded as a shapeless mass of quite varied densities, the variations in 
density being a result of external factors affecting the closeness of people 
geographically or of formal purposes which bring them specially into con- 
tact for conscious joint accomplishments. These areas of special density I 
call informal organizations, as distinguished from societal or general or- 
ganization in its informal aspects. Thus there is an informal organization 
of a community, of a state. For our purposes, it is important that there are 
informal organizations related to formal organizations everywhere. 


Informal organization, although comprising the processes of society 
which are unconscious as contrasted with those of formal organization 
which are conscious, has two important classes of effects: (a) it establishes 
certain attitudes, understandings, customs, habits, institutions; and (b) it 
creates the condition under which formal organization may arise. 

(a) "The most general direct effects of informal organization are customs, 
mores, folklore, institutions, social norms and ideals — a field of importance 
in general sociology and especially in social psychology and in social an- 
thropology. No discussion of these effects is necessary here, except on two 
points. The first is that as a result, as I think, of the inadequate attention to 
formal organization there is much confusion between formal institutions, 
resulting directly from formal organizational processes, and informal in- 


stitutions resulting from informal organization; for example, a practice 
established by legal enactment, and a custom, the latter usually prevailing 
in the event of conflict. Not only locally, in restricted collectivities, but 
in broad areas and large collectivities, there is a divergence, and a correc- 
tive interaction, between institutions informally developed and those elabo- 
rated through formal organization practices. The first correspond to the 
unconscious or non-intellectual actions and habits of individuals, the sec- 
ond to their reasoned and calculated actions and policies. The actions of 
formal organizations are relatively quite logical. 

(b) Informal association is rather obviously a condition which necessarily 
precedes formal organization. The possibility of accepting a common pur- 
pose, of communicating, and of attaining a state of mind under which there 
is willingness to cooperate, requires prior contact and preliminary inter- 
action. This is especially clear in those cases where the origin of formal 
organization is spontaneous. The informal relationship in such cases may 
"Be exceedingly brief, and of course conditioned by previous experience 
and knowledge of both informal and formal organization. 

The important consideration for our purposes, however, is that informal 
organization compels a certain amount of formal organization, and prob- 
ably cannot persist or become extensive without the emergence of formal 
organization. This partly results from the recognition of similarity of needs 
and interests which continuation of contact implies. When these needs and 
interests are material and not social, either combination and cooperation — 
at least to the extent of the development of a distributive purpose — or con- 
flict of interest, antagonism, hostility, and disorganization ensue. 

Even when the needs and interests are not material but are social — that 
is, there is a gregarious need of interaction for its own sake — it likewise 
requires a considerable concentration upon definite purposes or ends of 
action to maintain the association. This is especially true if instead of gre- 
garious impulses one goes back to a need of action as a primary propensity 
or instinct. It is an observable fact that men are universally active, and 
that they seek objects of activity. Correlative with this is the observation 
that enduring social contact, even when the object is exclusively social, 
seems generally impossible without activity. It will be generally noted that 
a purely passive or bovine kind of association among men is of short dura- 
tion. They seem impelled to do something. It is frequently the case that 
the existence of organizations depends upon satisfactions in mere associa- 
tion, and that this is the uniform and only motive of all participants. In 
these cases, nevertheless, we can, I think, always observe a purpose, or con- 
crete object of action, which may be of minor importance or even trivial. 
In these cases it may make no difference in a direct and substantial sense 
whether the objective is accomplished or not. For example, the discussion 
of some subject (or subjects) is essential to conversation which is socially 
desirable, yet the participants may be and frequently are rather indifferent 
to the subject itself. But the personal associations which give the satisfac- 


tions depends upon discussing something. This is easily observed in ordi- 
nary social affairs. 

Thus a concrete object of action is necessary to social satisfactions. The 
simplest form of doing something together is, of course, conversation, but 
it is evident that any particular form of activity for one reason or another 
is exhausted usually in a short time and that alternative methods of activity 
are on the whole not easy to devise either by individuals or groups. Hence, 
the great importance of established patterns of activity. Where circum- 
stances develop so that a variety of outlets for activity involving associations 
are not readily available — as is often the case, for example, with unem- 
ployed persons — the situation is one in which the individual is placed in 
a sort of social vacuum, producing a feeling and also objective behavior 
of being "lost." I have seen this a number of times. Where the situation 
affects a number of persons simultaneously they are likely to do any sort 
of mad thing. The necessity for action where a group of persons is involved 
seems to be almost overwhelming. I think this necessity underlies such 
proverbs as ','Idle hands make mischief," and I have no doubt that it may 
be the basis for a great deal of practice within armies. 

The opposite extreme to lack of concrete objectives of action is a con- 
dition of social complexity such that action may take a great many differ- 
ent forms involving the possibilities of association with many different 
groups. In such situations the individual may be unable to decide which 
activity he wishes to indulge in, or what groups he wishes to be associated 
with. This may induce a sort of paralysis of action through inability to 
make choice, or it may be brought about by conflict of obligations. The 
resulting condition was described by the French sociologist Durkheim as 
"anomie." This I take to be a state of individual paralysis of social action 
due to the absence of effective norms of conduct. 

The activities of individuals necessarily take place within local immedi- ^ 
ate groups. The relation of a man to a large organization, or to his nation, 
or to his church, is necessarily through those with whom he is in immediate 
contact. Social activities cannot be action at a distance. This seems not to 
have been sufficiently noted. It explains, or justifies, a statement made to 
me that comradeship is much more powerful than patriotism, etc., in the 
behavior of soldiers. The essential need of the individual is association, and 
that requires local activity or immediate interaction between individuals. 
Without it the man is lost. The willingness of men to endure onerous 
routine and dangerous tasks, which they could avoid is explained by this 
necessity for action at all costs in order to maintain the sense of social 
integration, whether the latter arises from "instinct," or from social con- 
ditioning, or from physiological necessity, or all three. Whether this neces- 
sity for action in a social setting arises exclusively from biological factors, 
or is partly inherent in gregarious association, need not be considered. 

Finally, purposive cooperation is the chief outlet for the logical or r) 
scientific faculties of men, and is the principal source of them as well. 


Rational action is chiefly a purposive cooperative action, and the personal 
capacity of rational action is largely derived from it. 

For these reasons, either small enduring informal organizations or large 
collectivities seem always to possess a considerable number of formal or- 
ganizations. These are the definite structural material of society. They 
are the poles around which personal associations are given sufficient con- 
sistency to retain continuity. The alternative is disintegration into hostile 
groups, the hostility itself being a source of integrating purposes (defense 
and offense) of the groups which are differentiated by hostility. Thus as 
formal organization becomes extended in scope it permits and requires an 
expansion of societal cohesiveness. This is most obviously the case when 
formal organization complexes of government expand — government itself 
is insufficient, except where economic and religious functions are included 
in it. Where with the expansion of formal government complexes there is 
correlative expansion of religious, military, economics, and other formal 
organizations, the structure of a large-scale society is present. When these 
formal complexes fail or contract, social disintegration sets in. There ap- 
pear to be no societies which in fact are not completely structured by formal 
organizations — beginning with families and ending in great complexes of 
states and religions. 

This is not to deny, but to reaffirm, that the attitudes, institutions, cus- 
toms, of informal society affect and are partly expressed through formal 
organization. They are interdependent aspects of the same phenomena — 
a society is structured by formal organizations, formal organizations are 
vitalized and conditioned by informal organization. What is asserted is 
that there cannot be one without the other. If one fails the other disin- 
tegrates. Nor is this to say that when disintegrated the separated or conflict- 
ing societies (except isolated societies) have no affect upon each other. 
Quite the contrary; but the effect is not cooperative but polemic; and even 
so requires formal organization within the conflicting societies. Complete 
absence of formal organization would then be a state of nearly complete 
individualism and disorder. 


Formal organizations arise out of and are necessary to informal organiza- 
tion; but when formal organizations come into operation, they create and 
require informal organizations." 

It seems not easily to be recognized without long and close observation 
that an important and often indispensable part of a formal system of co- 
operation is informal. In fact, more often than not those with ample ex- 
perience (officials and executives of all sorts of formal organizations) will 
deny or neglect the existence of informal organizations within their "own" 
formal organizations. Whether this is due to excessive concentration on 


the problems of formal organization, or to reluctance to acknowledge the 
existence of what is difficult to define or describe, or what lacks in concrete- 
ness, it is unnecessary to consider. But it is undeniable that major execu- 
tives and even entire executive organizations are often completely unaware 
of widespread influences, attitudes, and agitations within their organiza- 
tions. This is true not only of business organizations but also of political 
organizations, governments, armies, churches, and universities. 

Yet one will hear repeatedly that "you can't understand an organization 
or how it works from its organization chart, its charter, rules and regula- 
tions, nor from looking at or even watching its personnel." "Learning the 
organization ropes" in most organizations is chiefly learning who's who, 
what's what, why's why, of its informal society. One could not determine 
very closely how the government of the United States works from reading 
its Constitution, its court decisions, its statutes, or its administrative regula- 
tions. Although ordinarily used in a derogatory sense, the phrase "invisible 
government" expresses a recognition of informal organization. 

Informal organizations as associated with formal organization, though 
often understood intuitively by managers, politicians, and other organiza- 
tion authorities, have only been definitely studied, so far as I know, at the 
production level of industrial organizations. 2 In fact, informal organization 
is so much a part of our matter-of-course intimate experience of everyday 
association, either in connection with formal organizations or not, that we 
are unaware of it, seeing only a part of the specific interactions involved. 
Yet it is evident that association of persons in connection with a formal or 
specific activity inevitably involves interactions that are incidental to it. 


One of the indispensable functions of informal organizations in formal 
organizations — t hat of communic ation — has already been indicated. An- )) 
other function is that of the maintenance of cohesiveness in formal organ- ^ 
izations through regulating the~wiTlingness to serve and the stability of 
objective authority. A third function is the maintenance of the feeling of 
personal integrity, of self-respect, of independent choice. Since the inter- 
actions of informal organization are not consciously dominated by a given 
impersonal objective or by authority as the organization expression, the 

2 See especially the following: Elton Mayo, The Human Problems of an Industrial 
Civilization (New York: Macmillan Co., 1933); T. N. Whitehead, Leadership in ,a Free 
Society (Cambridge: Harvard University Press, 1936) and The Industrial Worker, 2 vols. 
(Cambridge: Harvard University Press, 1938); F. J. Roethlisberger and W. J. Dickson, 
Management and the Worker, Business Research Studies No. 9 (Harvard Graduate 
School of Business Administration, 1928). See also works of Mary P. Follett, who had 
great insight into the dynamic elements of organization; see especially her paper re- 
printed in Papers on the Science of Administration, edited by Gulick and Urwick (New 
York: Institute of Public Administration, 1937). 


interactions are apparently characterized by choice, and furnish the oppor- 
tunities often for reinforcement of personal attitudes. Though often this 
function is deemed destructive of formal organization, it is to be regarded 
as a means of maintaining the personality of the individual against certain 
effects of formal organizations which tend to disintegrate the personality. 

The purpose of this chapter has been to show (1) that those interactions 
between persons which are based on personal rather than on joint or com- 
mon purposes, because of their repetitive character become systematic and 
organized through their effect upon habits of action and thought and 
through their promotion of uniform states of mind; (2) that although the 
number of persons with whom any individual may have interactive experi- 
ence is limited, nevertheless the endless-chain relationship between persons 
in a society results in the development, in many respects, over wide areas 
and among many persons, of uniform states of mind which crystallize into 
what we call mores, customs, institutions; (3) that informal organization 
gives rise to formal organizations, and that formal organizations are neces- 
sary to any large informal or societal organization; (4) that formal organ- 
izations also make explicit many of the attitudes, states of mind, and 
institutions which develop directly through informal organizations, with 
tendencies to divergence, resulting in interdependence and mutual cor- 
rection of these results in a general and only approximate way; (5) that 
formal organizations, once established, in their turn also create informal 
organizations; and (6) that informal organizations are necessary to the 
operation of formal organizations as a means of communication, of cohe- 
sion, and of protecting the integrity of the individual. 

Motivation and Leadership 

Business is first concerned with attracting people to an organization. 
Concern in this case is with membership motivation. This, however, does 
not exhaust the area of motivation. Management must also be concerned 
with participative motivation, which concerns people who are currently 
members of the organization. Participative motivation involves eliciting or 
drawing forth, through various inducements, performance superior to that 
required in meeting the minimal conditions of the employment contract. 
Likert and Seashore discuss many of the problems involved. 

In the context of management, motivation implies a superior-subordi- 
nate relationship. This relationship precludes the possibility of transferring 
or delegating the responsibility for motivating to staff units or personnel 
departments. With all of its importance, however, the nature of man and 
the problems of motivation are not fully understood. As Temple Burling 
once stated: 

I once heard an executive say, "If we could only find people to whom money 
meant a lot, we could work out an incentive payment plan that would really 
work." But the way he said it made it perfectly clear that he wasn't questioning 
the incentive plan at all. The trouble was that people are made wrong. They 
ought to be the sort of creatures that aren't influenced by anything except the 
desire to make more money. The specifications are sound enough; God seems to 
have slipped up in not providing people to meet the specifications. It never would 
have occurred to him to say, "If we could only find people with eyes in back of 
their heads, they could tend two machines instead of one." And he certainly 
wouldn't design a machine that had to be watched in two directions at once, and 
then try to find people with eyes in the backs of their heads. 

Many techniques of motivation are available. They may be based upon 
either positive or negative inducements to perform. The former type adds 
to the reward of the participant, while the latter takes away or threatens 
to diminish individual rewards. One technique of positive motivation 
which is gaining acceptance in industry today is that of permitting and 
encouraging subordinates to exercise judgment and choice in decisions 
which affect them, i.e., "participative" management. Allport analyzes the 
psychological aspects of participative motivation while Schwab examines 
the nature and role of participative management in the modern industrial 

A related aspect of motivation is leadership; possibly, leadership is the 
inducing agent. At least, leadership is an agent which causes change in an 
organization. This change may, or may not be consistent with the formal 
purposes of a group. If consistent, it is judged a favorable change; if in- 
consistent, unfavorable. The magnitude of the change, as well as its direc- 
tion, is a measure of the effectiveness of the leadership. This agent, as 



concerns management, is man. Simon, Smithburg, and Thompson attack 
the difficult problems of defining the meaning and establishing the iden- 
tifications and roles of leaders. 

Many factors which determine the effectiveness of leadership have been 
studied, such as situations which produce leaders and the personal traits 
of leaders. Brown presents a summary of the studies of leadership situations 
and analyzes their structures. McGregor treats the superior-subordinate 
relationship with particular emphasis upon the role of the follower. The 
dependence of the subordinate and his need for security and self-realization 
as factors in a leadership situation are discussed. 

Worker Interest and Motivation Examined 


The problems of manpower are essentially of three kinds: (1) those con- 
cerned with the composition of the labor force as to sex, age, skills, and 
other critical characteristics, (2) those concerned with the availability of 
manpower in terms of numbers, geographic location, and mobility, and 
(3) those concerned with the effective utilization of manpower in the jobs 
to be done. 

Traditionally, the first two aspects have been the province of the labor 
economist, the sociologist, and allied population specialists, while the lat- 
ter has been the concern of the industrial engineer, the psychologist, and 
the organization manager. This division of labor has been accompanied 
by sharp differences in the way the problems are viewed, the assumptions 
made about the nature of a man as a source of labor, the methods used for 
research, and the kinds of administrative action expected to result from 
studies of manpower problems. 

The importance of effective management of manpower stems directly 
from a few basic facts about human beings and human behavior: 

1. Individuals differ greatly in their potential and actual contribution to the 
total productive effort and the kind of contribution made. 

2. Behavior is modifiable, and people can and do learn new skills. 

3. Behavior is motivated, and the actual output of productive effort is depend- 
ent to a large degree upon the psychological factors which lead each individ- 
ual to produce more or less within the limits of his ability. 

* Rensis Likert and Stanley E. Seashore, "Increasing Utilization through Better Man- 
agement of Human Resources," Manpower in the United States (Industrial Relations 
Research Association, 1954), pp. 23-38. 


The consequence of these basic facts is that management, or a society, can 
achieve a substantial range of results in terms of productivity, depending 
on how adequately the human resources are organized and trained and on 
how well people are motivated to produce. This range of possible produc- 
tivity is in addition to that which depends upon the physical movement 
of manpower among regions and firms. 

Individual Differences 

Individual differences exist, and the work specialization and selective 
upward mobility that this fact implies are encouraged. Yet few people are 
aware of the magnitude and potential importance of these differences. 1 It 
appears, to put it roughly, that some people can sense at least twice as well, 
move twice as fast, and lift twice as much as others. In typical business 
and industrial jobs, these individual differences may be exaggerated or 
diminished, but they do not disappear except where there is deliberate 
control keeping productivity at a level low enough to accommodate the 
slowest worker. Even in jobs where the poorest performers have been 
weeded out by quits and discharges, and where the better performers have 
left for better jobs, there remains a substantial difference in performance. 
Among experienced workers on a variety of jobs these differences still tend 
to be so great that the better performer will turn out about twice as much 
work as the poorer performer. 

More important than differences among individuals in potential and 
actual performance are the differences that are found within the individ- 
ual. The human being as a productive unit is not superior in all respects 
nor inferior in all respects — every normal individual has some abilities or 
potential abilities which, if utilized, permit him to make his optimum con- 
tribution to the total productive effort. Clark Hull 2 investigated individual 
differences in a variety of traits and found that the "trait variation" within 
individuals is almost as great as the variation among individuals. This fact 
is the basis for much of the work that has been done on the measurement 
of aptitudes and abilities, and the vocational counseling and selective em- 
ployment of individuals. 

Considerable progress has been made in the utilization of individual 
differences and intra-individual trait differences. Many of the more pro- 
gressive organizations now use selection tests to increase the average produc- 
tivity of those placed in various jobs. They use tests, as well as other 
methods, not to reject applicants but for their selective placement on jobs 
having different requirements, in order that each individual may be as- 
signed work in keeping with his special abilities. These procedures can be 
effective in increasing the net productive effort from a work group of 

ID. Wechsler, The Range of Human Capacities (Baltimore: Williams & Wilkins, 

2 Hull, Aptitude Testing (Yonkers, N.Y.: World Book Company, 1928). 


mixed number; Hay, 3 and Selover and Vogel 4 have described instances of 
this kind in which the effectiveness of manpower has been increased 
through the utilization of individual differences. 

Manpower Problems and the Modifiability of Human Behavior 

A dramatic demonstration of the adaptability and modifiability of man- 
power occurred during the months following America's entry into World 
War II. Millions of people changed to new occupations completely unlike 
those to which they had become accustomed. Millions of people — aged, 
handicapped, and non-employed — became a part of the manpower pool 
and acquired job skills or a technical competence. The existing estimates 
of the availability of manpower in the various occupational categories be- 
came meaningless. 

Under the pressure of wartime necessity, intensified and systematic train- 
ing programs were instituted in all major industries. Marginal people — 
formerly considered inappropriate for certain jobs — were successfully 
taught the necessary skills. The task was eased by large-scale modification 
of many traditional craft-associated tasks into simpler jobs with limited 
skill requirements. Improved machinery and work methods further simpli- 
fied the skills to be taught. Many jobs formerly surrounded by an aura of 
mystery and complexity, and traditionally learned through an extended 
apprenticeship, were found to be essentially simple tasks which could be 
taught in a matter of weeks or months, often with an improvement over 
prior standards of output and quality. 

It is true, of course, that many problems accompanied this radical adap- 
tation of the total labor force to a changing need. Training was often 
costly or ineffectively done; many organizations had difficulties stemming 
from the "dilution" of their work force by single-skill workers who re- 
placed all-round craftsmen. An increased burden was placed upon super- 
visory personnel and technical staffs. Yet the productive resources of the 
nation were tremendously increased by this creative and imaginative train- 
ing effort, and the utilization of existing skills was increased. 

With this demonstration that housewives can be made into skilled ma- 
chine operators, that farm hands can be made into aircraft mechanics, and 
that sales clerks can be made into electronics technicians — with the knowl- 
edge that these modifications in behavior can readily be accomplished, it 
is no longer possible to think of the labor force as composed of static occu- 
pational categories. The individual as a unit of manpower must be re- 
garded as a highly versatile and adaptable unit with a potential produc- 
tive contribution far exceeding his present contribution. 

3 E. N. Hay, "Predicting Sucess in Machine Bookkeeping," Journal of Applied Psy- 
chology (December, 1943). 

4 Selover and J. Vogel, "The Value of Testing in a Tight Labor Market," Personnel 
Psychology 1 (Spring, 1948), pp. 447-56. 


Manpower Problems and Human Motivation 

Management has long been concerned with the utilization of manpower 
through the effective channeling of human motives. It is common to ob- 
serve that individuals are much more productive under some conditions 
than others, and that similar departments or organizations may differ 
greatly in output, cost performance, absenteeism, turnover, employee satis- 
faction, and other indices of effectiveness even though there are no dis- 
cernible reasons for the differences other than those concerning the human 
factors. A substantial literature has developed representing the accumu- 
lated experience and wisdom of managers on matters of organization and 
supervision. Elaborate policies and programs have developed to control 
the form of organizations, financial rewards, supervisory practices, equita- 
ble distribution of benefits, and other matters related to employee moti- 

Only recently have methods been developed for testing in a systematic 
way the effectiveness of the methods commonly used to motivate per- 
formance. In the past few years techniques for attitude measurement, for 
sampling of populations, and for statistical analysis of complex relation- 
ships have permitted a beginning in the scientific analysis of human moti- 
vations in organizational settings. The Institute for Social Research at the 
University of Michigan is one of several agencies working in this area. Its 
research has been conducted or is under way in a life insurance company, a 
railroad, a textile mill, two public utilities, an auto factory, a heavy ma- 
chinery factory, a household appliance factory, a labor union, a govern- 
ment agency, and two branches of the armed forces. 5 The findings that 
are beginning to emerge are of considerable practical importance and in 
some instances throw doubt upon current managerial assumptions and 
practices. The following pages will present some of these findings as they 
bear on problems of effective utilization of manpower. 

Financial Incentives 

Most organization managers consider economic return as the basic source 
of motivation. In nearly all organizations the system of differential pay, 
promotion and upgrading, and variable pay based on output are consid- 
ered central to the motivational system. Yet little is known about the 
effectiveness of financial motivation and the conditions under which it is 
of maximum effectiveness. 

It is clear that high pay does not in itself produce satisfaction with the 
organization as a place to work or with the amount of pay itself. It is not 
uncommon to find relationships in which higher pay (within a generally 
favorable scale) appears to be related to lower satisfaction with pay. 6 The 

5 Institute for Social Research: 1952 (Ann Arbor, Mich.: University of Michigan Press, 

6 Nancy Morse, Satisfactions in the White-Collar Job (Ann Arbor, Mich.: University of 
Michigan Press, 1953). 


research indicates that the factors operating are complex, and that, for 
example, the expectations of the employees regarding pay may determine 
whether a given wage is satisfying or not. There is evidence that the higher- 
paid employees were generally the long-service employees whose pay, while 
objectively high, may have been low in relation to needs or expectations. 

The ideas of incentive pay based on performance relative to some stand- 
ard raises a number of problems as to the perception of what the standard 
really is, and how it is accepted. The standard of performance, however 
established and publicized, may be perceived differently by different peo- 
ple. One study 7 shows that, even though the formal standards were well 
known and actual performance relative to standard was reported to the 
employees daily, there were great discrepancies in perception of how rea- 
sonable the standards were, what the "real" standards were and how others 
perceived the standards. Only in the high-production crews were the stand- 
ards seen as reasonable and valid by both supervisors and employees. 

While the installation of a piecework or other form of incentive-pay 
plan often results in a substantial increase in productivity, it is a common 
experience that such plans are resisted or even totally rejected by the em- 
ployees who stand to gain financially from them. There is currently in 
progress a study in an appliance factory of the conditions under which an 
incentive plan will be accepted. The preliminary results point toward the 
first-line supervisor as a critical figure in the success of such a plan; em- 
ployee satisfaction with the plan and performance under it appears to be 
closely related to the supervisor's own acceptance of the plan, his willing- 
ness to discuss it often and openly, and the confidence he generates by the 
manner in which he handles complaints regarding the operation of the 

Supervision and Supervisory Practices 

Differences in productivity and morale are directly related to differences 
in supervisory practices. Apparently the relationship established between 
supervisor and subordinate is a most vital one in the effective utilization of 
manpower, but the kind of relationship that produces the best result is not 
necessarily consistent with the prevailing conception of "good" supervision. 
One research finding that leads to this observation has been confirmed in 
several organizations. A study of office workers shows that those who super- 
vise high-production units in this organization tend themselves to be under 
only general supervision from higher levels, as contrasted with those who 
supervise low-producing units, who tend to be under close supervision. 8 
In turn, non-supervisory employees in low-production units are under 
more detailed supervision. These findings point rather clearly to the idea 

7 By Robert Kahn, to be published. 

8D. Katz, N. Maccoby, and N. Morse, Productivity, Supervision and Morale in an 
Office Situation (Ann Arbor, Mich.: University of Michigan Press, 1950). 


that supervision is more effective in motivating productivity if it is suffi- 
ciently general to give supervisors and workers the latitude they require 
to do their work intelligently. They imply that subordinates perform bet- 
ter if they are allowed considerable latitude in doing their work. A related 
kind of information from a factory producing heavy machinery 9 reveals a 
relationship between the productivity of work groups and the amount of 
pressure they feel for productivity. This relationship is inverse. High pro- 
ductivity is associated with the absence of a feeling of pressure for produc- 
tivity. Data of this kind suggest that the traditional concept of the "good" 
supervisor as one who supervises his people closely and puts direct pressure 
upon them to produce may be seriously in error. 

The "employee-centered" supervisors tend to have high production 
units. 10 When employee groups with high morale and other groups with 
low morale (in a public utilities concern) are asked to describe what their 
supervisors do, we find 11 that the high and low groups are not very different 
with respect to supervisory functions such as enforcing the rules, arranging 
work, making work assignments, supplying materials, and other produc- 
tion-oriented or rule-oriented factors. On the other hand, on such matters 
as recommending promotions, informing men what is happening, keeping 
men posted on how well they are doing, and other personnel-oriented 
supervisory functions, substantial differences are found between the highl- 
and low-morale groups. 

The effective supervisor, as regards both production and morale, is one 
who tends to see his job primarily in terms of human problems, of building 
a team to do the work required, rather than in terms of rules, procedures, 
technical efficiency, and direct pressure for productivity. 

Group Pride and Solidarity 

Related to group standards and employee participation in decisions are 
findings on the importance of the individual's identification with his work 
group, and his pride and feeling of solidarity with the group. It is becoming 
clear that the individual employee's behavior cannot be understood except 
in the context of the team or group of which he is a part. From data for 
two situations, one involving white-collar office workers, the other section 
hands on a railroad, 12 it is evident that the high-production sections tend 
to have a high level of pride in their work group while the low-production 
sections tend to have a low level of pride. There is a similar relationship 
between productivity and feeling of group solidarity. 13 In a comparison of 

9 Cited in a study by Robert Kahn, to be published. 

10 Katz, Maccoby, and Morse, op. cit. 

ii In a study by Floyd Mann, to be published. 

12 D. Katz, N. Maccoby, G. Gurin and L. Floor, Productivity, Supervision and Morale 
Among Railroad Workers (Ann Arbor, Mich.: University of Michigan Press, 1951). 

13 Shown in a study by Robert Kahn to be published. 


low-productivity and high-productivity groups, there is a striking differ- 
ence in the percentage who say that their group is "better than most." 
These data present further evidence to show that the work group or team 
is an important focus of social orientation for the worker and has a definite 
relationship to his productivity and morale. 

Autonomy and Communication among Supervisors 

The findings presented so far have related principally to production 
workers. Comparable findings are available for supervisors. Supervisors of 
high-production sections tend to be much more satisfied with their job 
setup. The principal reason that low-production supervisors give for not 
being satisfied with the setup of their job is insufficient delegation of au- 
thority and autonomy to them. High-production foremen tend to see 
themselves as having more autonomy in planning ahead. High-production 
supervisors tend to feel that they always or almost always are told about 
things that are important to them in their work. Supervisors having low 
productivity tend more to feel that they do not receive adequate com- 
munication from people higher in the organization. The more supervisors 
participate in decisions affecting them and their work, the greater is the 
extent to which they use participation and group decision with their own 
work group. These results are in contrast to the not uncommon idea that 
each level in an organization should keep a sharp eye and close control 
over the actions of those at the next lower level. 

The Job Itself 

While attention is given today to making organizations attractive and 
satisfying to employees, little direct effort is devoted to making the work 
itself an important source of productive motivation and satisfaction. In 
fact, the trend appears to be in the opposite direction because of work 
simplification programs and the increasing mechanization of jobs. Much 
of the work in industry and business is becoming inherently uninteresting. 
This trend is based upon the demonstrated advantages of specialization 
and the logical proposition that more routine tasks can be performed with 
greater ease and with a lesser investment in training, planning, and super- 
vision. It ignores the possibility that the gain in potential efficiency may 
in some cases be more than offset by a loss in employee motivation and 
satisfaction. Many questions have been raised about the effects which fol- 
low the dilution of skill requirements and the increased routineness of 
jobs, but the scientific testing of the optimum simplification in relation 
to the maintenance of job interest, satisfactions, and motivation to pro- 
duce has progressed beyond a beginning. 

The results obtained in a large clerical organization are representative. 14 
Employees tended to have a high degree of satisfaction with the job itself 

14 Morse. 


if the skill demands were high, if the job permitted a variety of unlike 
activities, and if the job (or the way it was supervised) permitted the em- 
ployee to feel that he could make some decisions about how the work was 
to be done. Also important was the relation of the job to the employee's 
skill level; high satisfaction accompanied the feeling that the job made 
full use of abilities and skills. It is important to note, however, that not 
all employees had aspirations or needs for more complex and more de- 
manding work; many were content with routine work and did not respond 
unfavorably to a high degree of work simplification. 

Participative Motivation 


American psychologists have to their credit the discovery that motor 
activity plays a pivotal role in higher mental functions. Take as an exam- 
ple, learning: we have repeatedly insisted that learning is "not passive 
absorption but an active response." In the classic experiment by Gates, 
learning scores jumped 100 per cent when four-fifths of the subject's time 
was devoted to recitation rather than to passive reading (Arch. Psychol 6, 
1917). Haggard and Rose, recently reviewing many learning studies, in- 
cluding those that have to do with the simple conditioning of reflexes, 
report that in all cases learning seems to be facilitated if the subject himself 
overtly takes part, perhaps by turning the switch that rings the condition- 
ing bell, or by drawing a line to accompany the apparent movement of the 
autokinetic phenomenon, or even by clenching the fist while memorizing 
nonsense syllables. These authors generalize these studies under a Law of 
Active Participation, "... when an individual assumes an active role in a 
learning situation (a) he tends to acquire the response-to-be-learned more 
rapidly, and (b) these response-patterns tend to be more stably formed, 
than when he remains passive" (/. Exp. Psychol. 34, 1944). 

How to permit such helpful motor activity to go on in a classroom where 
50 pupils are busy learning, is a large-sized pedagogical problem. "The chief 
source of the 'problem of discipline' in schools," says Dewey, "is that the 
teacher has often to spend a larger part of the time in suppressing the 
bodily activities" of the children (Democracy and Education, New York: 

* Gordon W. Allport, "The Psychology of Participation," The Psychology Review, 
Vol. LIII, No. 3 (May, 1945), pp. 119-127. The Chairman's address to the Society for the 
Psychology Study of Social Issues, delivered September 16, 1944, at Columbia Univer- 
sity. Dr. G. R. Schmeidler has kindly assisted in the preparation of this paper. 


1919). The situation is wholly abnormal in that the teacher tries to divorce 
bodily activity from the perception of meaning; and yet perception of 
meaning is incomplete without full manipulation and adequate bodily 

Memory for material learned in school and college is notoriously poor, 
so poor that educators are forced to console themselves with the wistful 
adage which holds education to be "what you have left when you have for- 
gotten all you learned in school." Perhaps a few studious attitudes, a few 
analytical habits are left; but should content disappear from the mind as 
rapidly as it does? We know that content acquired through personal ma- 
nipulation does not seem to evaporate so rapidly. 

I recently asked 250 college students to write down three vivid memories 
of their school work in the 8th grade. Afterward I had them indicate 
whether the memories involved their own active participation in the 
events recorded. Were they reciting, producing, talking, playing, arguing, 
or were they passively listening, watching, not overtly involved? Three- 
quarters of the memories were for situations in which the subject himself 
was actively participating, even though the percentage of time actually 
spent in participation in the average 8th grade room must be small. 

We may mention also the problem of voluntary control. Although Amer- 
ica has contributed little enough to the psychology of volition, what it has 
contributed is typical — namely the finding of Bair (Psychol. Rev. 8, 1901) 
and others, that a large amount of excessive, and apparently futile, motor 
involvement is necessary before one can gain control voluntarily over a 
limited muscular segment of the body. We know that a considerable over- 
flow of effort is needed before fine skills can be differentiated, and before 
the individual can develop any satisfactory degree of self-determination. 
In the realm of modern therapy self-propelled activity plays an increas- 
ing part, as the "Rogers technique" becomes more and more widely ap- 
plied. Analogously, the Kenny treatment for infantile paralysis requires 
the patient to take more and more responsibility and to be more and more 
active, otherwise, it is discovered, the suggestions given by the therapeutist 
will not accomplish their purpose (Bohnengel: Psychosomat. Med. 6, 1944). 
Angyal refers to the universal experience of psychiatrists that healthy ideas 
can be easily conveyed to the patient on the intellectual level without the 
slightest benefit accruing. The difficulty is to induce a state in which the 
idea "permeates the personality and influences the behavior" (Foundations 
for a Science of Personality, New York: 1941). In this war we have learned 
the importance of reconditioning at the front, that is, of allowing the 
patient himself quickly to work out his own relations with the terrifying 
environment that shocked him. 

Facing the problem of re-education in Germany, Lewin points to the 
impossibility of ideological conversion until requisite experience is avail- 
able. "To understand what is being talked about," he says, "the individual 
has to have a basis in experience." No amount of verbal defining will 
convey the meaning of such concepts as "his Majesty's loyal opposition" 


or "fair play." To most Germans loyalty is identified with obedience; the 
only alternative to blind obedience is lawless individualism and laissez- 
faire (Pub. Opin. Quart. 7, 1943). 

One of the chief problems confronting the AMG today is to keep the 
inhabitants of liberated countries active in shaping their own destiny (All- 
port: ibid.). Handouts beget apathy, and apathy prevents an interest in 
one's own future. How much better it was for Parisians to retake their own 
city than for the Allies to have done all the work, handing over the finished 
product. In his excellent new book Mental hygiene, Klein expresses the 
point: "Without action there is no shift from the wish to the deed. There is 
motive, but no purpose. There is yearning without striving; hence the po- 
tential self-improvement dies stillborn" (New York: 1944). To be sure, we 
must not over-simplify the problem of rescue and emergency relief for 
Europe's dazed and demoralized citizens. Yet the only rule to follow, so 
far as it is at all practicable, is to allow them to participate fully in their 
own rescue and rehabilitation. 


Facts of this sort prove to us that people have to be active in order to 
learn, in order to store up efficient memories, to build voluntary control, 
to be cured when they are ill, restored when they are faint. 

But implied in much American work is the proposition that one activity 
is as good as any other activity. It is random movement, according to much 
of our learning theory, that brings the organism to an eventual solution. 
And according to one experimentalist, "If the body muscles are tense, the 
brain reacts much more quickly and intensely, if they are relaxed, it may 
react weakly or not at all" (Bills: Psychology of Efficiency, New York: 
1943). The implication seems to be that tenseness of any kind makes for 
mental alertness. Activity as such is approved. 

Random movement theories of learning, muscular tension theories of 
efficiency, speed theories of intelligence, and motor theories of conscious- 
ness do not make a distinction that seems to me vital, namely, the distinc- 
tion between mere activity as such and true, personal participation. 

Before we examine this distinction as it affects psychological theory and 
practice, I should like to point out that the self-same distinction occurs in 
the economic and social life of the common man. 

Take, for example, Citizen Sam who moves and has his being in the 
great activity wheel of New York City. Let us say that he spends his hours 
of unconsciousness somewhere in the badlands of the Bronx. He wakens 
to grab the morning's milk left at the door by an agent of a vast Dairy and 
Distributing system whose corporate maneuvers, so vital to his health, 
never consciously concern him. After paying hasty respects to his landlady, 
he dashes into the transportation system whose mechanical and civic mys- 
teries he does not comprehend. At the factory he becomes a cog for the 


day in a set of systems far beyond his ken. To him (as to everybody else) 
the company he works for is an abstraction; he plays an unwitting part 
in the "creation of surpluses" (whatever they are), and though he doesn't 
know it his furious activity at his machine is regulated by the "law of 
supply and demand," and by "the availability of raw materials" and by 
"prevailing interest rates." Unknown to himself he is headed next week 
for the "surplus labor market." A union official collects his dues; just why 
he doesn't know. At noontime that corporate monstrosity, Horn and Har- 
dart, swallows him up, much as he swallows one of its automatic pies. 
After more activity in the afternoon, he seeks out a standardized day-dream 
produced in Hollywood, to rest his tense, but not efficient mind. At the 
end of his day he sinks into a tavern, and unknowingly victimized by the 
advertising cycle, orders in rapid succession Four Roses, Three Feathers, 
Golden Wedding and Seagram's which "men who plan beyond tomorrow" 
like to drink. 

Sam has been active all day, immensely active, playing a part in dozens 
of impersonal cycles of behavior. He has brushed scores of "corporate per- 
sonalities," but has entered into intimate relations with no single human 
being. The people he met are idler-gears like himself meshed into systems 
of transmission, far too distracted to examine any one of the cycles in which 
they are engaged. Throughout the day Sam is on the go, implicated in this 
task and that, — but does he, in a psychological sense, participate in what 
he is doing? Although constantly task-involved, is he ever really ego- 
involve df 

Now this problem is familiar to all of us, and one of the most significant 
developments of the past decade is its entrance into both industrial and 
social psychology. The way the problem has been formulated by industrial 
psychologists is roughly this: 

The individual's desire for personal status is apparently insatiable. 
Whether we say that he longs for prestige, for self-respect, autonomy, or 
self-regard, a dynamic factor of this order is apparently the strongest of his 
drives. Perhaps it is an elementary organismic principle as Angyal (op. cit.) 
and Goldstein {Human Nature in the Light of Psycho pathology , Cam- 
bridge: 1940) would have it; perhaps it is rather a distillation of more 
primitive biological drives with social competitiveness somehow added to 
the brew. For our purposes it does not matter. 

What the industrial psychologist has discovered is that when the work- 
situation, in which the individual finds himself realistically engages the 
status-seeking motive, when the individual is busily engaged in using his 
talents, understanding his work, and having pleasant social relations with 
foreman and fellow-worker, then he is, as the saying goes, "identified" 
with his job. He likes his work; he is absorbed in it; he is productive. In 
short, in McGregor's terms he is industrially active; that is to say, he is par- 
ticipant (/. Consult. Psych. 8, 1944). 

When, on the other hand, the situation is such that the status-motive 
has no chance of gearing itself into the external cycles of events, when the 


individual goes through motions that he does not find meaningful, when 
he does not really participate, then come rebellion against authority, com- 
plaints, griping, gossip, rumor, scape-goating, disaffection of all sorts. The 
job-satisfaction is low. In McGregor's terms under such circumstances the 
individual is not active; he is industrially reactive. 

In the armed forces, in federal employment, in school systems, the same 
principle holds. Ordinarily those at the top find that they have suffi- 
cient comprehension, sufficient responsibility, and sufficient personal status. 
They are not the ones who gripe and gossip. It is the lower-downs who 
indulge in tendency-wit against the brass hats, who complain, who go 
AWOL, become inert, or gang up against a scapegoat. When in actual 
combat, all the energies and training, all the personal responsibility of 
which a soldier is capable, are called upon, then egos are engaged for all 
they are worth. Men are active; they have no time to be reactive; nor have 
they reason to be. 

Accepting this analysis as correct the problem before us is whether the 
immense amount of reactivity shown in business offices and factories, in 
federal bureaus, in schools, can be reduced, as it is when men at the front 
are using all their talents and are participating to the full in life-and-death 

We are learning some of the conditions in which reactivity does decline. 
Friendly, unaffected social relations are the most indispensable condition. 
Patronizing hand-outs and wage-incentive systems alone do not succeed. Op- 
portunities for consultation on personal problems are, somewhat surpris- 
ingly, found to be important. And as members of this Society have shown, 
group decision, open discussion, and the retraining of leaders in accordance 
with democratic standards yield remarkable results. One of Lewin's dis- 
coveries in this connection is especially revealing. People who dislike a 
certain food are resistant to pressure put upon them in the form of per- 
suasion and request; but when the individual himself as member of a group 
votes, after discussion, to alter his food-habits, his eagerness to reach this 
goal is independent of his personal like or dislike (Educ. Leadership 1, 
1944). In other words, a person ceases to be reactive and contrary in respect 
to a desirable course of conduct only when he himself has had a hand in 
declaring that course of conduct to be desirable. 

Such findings add up to the simple proposition that people must have 
a hand in saving themselves; they cannot and will not be saved from the 

In insisting that participation depends upon ego-involvement, it would 
be a mistake if we were to assume that we are dealing with a wholly self- 
centered and parasitic ego that demands unlimited status, and power for 
the individual himself. Often, indeed, the ego is clamorous, jealous, pos- 
sessive and cantankerous. But this is true chiefly when it is forced to be 
reactive against constant threats and deprivations. We all know of "power- 
people" who cannot, as we say, "submerge their egos." The trouble comes, 
I suspect, not because their egos are unsubmerged, but because they are 


still reactive toward some outer or inner features of the situation which 
are causing conflicts and insecurity. Reactive egos tend to perceive their 
neighbors and associates as threats rather than collaborators. 

But for the most part people who are participant in cooperative activity 
are just as much satisfied when a teammate solves a common problem as 
when they themselves solve it (Lewis: /. Exp. Psychol. 34, 1944). Your ten- 
sions can be relieved by my work, and my tensions by your work, provided 
we are co-participants. Whatever our egos were like originally, they are 
now for the most part socially regenerate. Selfish gratifications give way to 
cooperative satisfaction when the ego-boundaries are enlarged. 

Nowadays we hear it said by our own colleagues that Americans will 
never participate in a postwar world union unless it is shown clearly to be 
to their self-interest to do so. Undoubtedly the statement is true, but self- 
interest is highly extensible. A revealing study by Lt. Leighton conducted 
at a Japanese relocation center makes this point clear (Am. J. Psychiat. 100, 

When the Japanese were asked to pick cotton in nearby ranches to help 
save the crop, very few responded. The reason was that they were expected 
to donate all wages above $16.00 a month to a community trust fund, to be 
used for the common good. 

There was as yet insufficient community feeling; the over-all trust fund 
seemed too big, too distant, too uncertain. All that happened was endless 
argument for and against the trust fund, while the cotton stood in the 

At this point the schools asked to be allowed to go picking and to use 
the money for school improvements. This request was granted, and soon 
church groups, recreational societies and other community units showed 
themselves eager to go on the same basis; and the project was a success. 

What we learn from this study is that self-interest may not extend to 
include an object so remote and impersonal as a community trust fund, but 
may readily embrace school improvements, church and recreational cen- 
ters. For most people there is plenty of ego-relevance to be found in team- 
work provided the composition of the team and its identity of interest are 
clearly understood. 

Americans will endorse international cooperation in the future (as they 
do at the present moment) provided they continue to see its relevance to 
their own extended egos, and provided they feel that in some way they 
themselves are participating in the decisions and activities entailed. 

Nearly everyone will bear testimony to the superiority of satisfaction 
that comes from successful teamwork as contrasted to solitary achievement. 
Membership in a group that has successfully braved dangers and sur- 
mounted obstacles together is a membership that is ego-involved, and the 
egos in question are not parasitic but are socialized. 

An important by-product of participation, as I am using the term, is the 
reduction of stereotypes. Sam's mind we can be sure was a clutter of false 
stereotypes concerning the Dairy company, the transportation system, the 


abstract corporation for which he works, concerning economic laws, fed- 
eral regulation, to say nothing of the tabloid conceptions begotten in Hol- 
lywood and by advertisers. Had he really participated in his employment 
his notions of "the Company," of surpluses, of labor unions would have 
become realistic. In recent years for some of us a job in Washington has 
happily shattered our previous stereotypes concerning sovereignty, bu- 
reaucracy, and other alleged attributes of "the government." One of the 
favorable results of the war will be the fact that men who have shared a 
common destiny, participating together in bombing crews, in life-and- 
death assaults, will at last be freed from their tabloid assumptions regard- 
ing the nature of Jews, Negroes, Catholics, and other American minorities. 


At the time of a presidential election we know that only about three in 
every five eligible voters go to the polls. At primary time the ratio is more 
likely to be one in every four. Yet voting is the irreducible minimum of 
participation in political democracy. People who do not vote at least once 
in four years are totally non-participant; those who vote only in a presi- 
dential election — these comprise at least a third of all voters-are scarcely 
better off. And if we wished to complicate matters we might ask whether 
those who go to the polls are really participating with the deeper layers 
of personality, or whether their voting is, so to speak, a peripheral activity 
instigated perhaps by fanfare or by local bosses. It would not be hard to 
prove that participation in political affairs, as well as in industrial, edu- 
cational, and religious life, is rare. In this respect most people resemble 
Citizen Sam. 

Two contemporary social psychologists have concerned themselves 
deeply with this problem. They see that increasingly since the days of the 
industrial revolution individuals have found themselves in the grip of im- 
mense forces whose workings they have no power of comprehending, much 
less influencing. One of the writers, John Dewey, states the problem in this 

The ramification of the issues before the public is so wide and intricate, the 
technical matters involved are so specialized, the details are so many and so shift- 
ing, that the public cannot for any length of time identify and hold itself. It is 
not that there is no public, no large body of persons having a common interest 
in the consequences of social transactions. There is too much public, a public too 
diffused and scattered and too intricate in composition (The Public and Its Prob- 
lems, New York: 1927). 

Dewey has spent many years seeking remedies for this situation. Chiefly 
he has laid emphasis upon the need for face-to-face association, for evolving 
democratic methods within school and neighborhood so that citizens may 
obtain in their nerves and muscles the basic experience of relating their 
activities in matters of common concern. Some political writers, e.g., Mary 
P. Follet {Creative Experience, New York: 1924), have held that the solu- 
tion lies in reconstituting political groups on a small enough scale so that 


each citizen may meet face-to-face with other members of a geographical or 
occupational group, electing representatives who will in turn deal face-to- 
face with other representatives. Though the town may no longer be the best 
unit for operation, the spirit of the town-meeting is thus to a degree recap- 
tured. "Democracy," says Dewey, "must begin at home and its home is the 
neighborly community" (The Public and Its Problems). 

Central to Dewey's solution also is freedom of publicity. To obstruct or 
restrict publicity is to limit and distort public opinion. The control of 
broadcasting and of the press by big advertisers is an initial source of dis- 
tortion. Other groups need freer ventilation for their views, in order to 
reduce rigidity, hostility, and reactivity. 
' The second psychologist, F. H. Allport, states the problem rather differ- 
ently. He asks how an individual enmeshed within innumerable cycles of 
activity all imposed upon him from without can retain his integrity as a 
person? Like Sam, he finds himself a cog in countless corporate machines. 
State, county, federal governmental systems affect him, as do economic 
cycles, the impersonal systems known as private enterprise, conscription 
in wartime, social security; so too, city transportation, milk production and 
delivery, consumption, housing, banking. But he does not affect them. How 
can he? F. H. Allport points to an inherent contradiction that seems to lie 
in Dewey's position (Institutional Behavior, Chapel Hill: 1933). The latter 
hopes that the individual will participate in every public that his own 
interests create in common with others. That is to say, Sam should join 
with others who are affected by the same municipal, banking, transporting, 
feeding, housing cycles and work out common problems. But Sam would 
be a member of hundreds of segmental types of public. And in dashing 
from one "common interest" meeting to another, he would not find his 
interests as an individual truly fulfilled by being partially included in 
multiple groups. He would still be a puppet of many systems. As complexi- 
ties increase under modern conditions, total inclusion of the personality in 
specialized publics becomes increasingly difficult to achieve. 

Like Dewey, F. H. Allport has given various suggestions for the solution 
of the problem, but chiefly his emphasis has been upon the creation of a 
scientific spirit in the common man encouraging him to call into question 
the corporate fictions, the sanctity of the economic cycles, which, unthink- 
ingly, he takes for granted. By questioning the transcendental reality com- 
monly ascribed to nationhood, to "consumer competition," to institutional 
fictions, and by substituting direct experience with the materials affecting 
his life, the individual may himself eventually work out a measure of in- 
tegrity and wholeness within himself (Proc. Con]., on Sci. Spirit and Dem. 
Faith, New York: 1944). 

Both Dewey and F. H. Allport seem to agree that the only alternative to 
a keener analysis of the behavioral environment and more active participa- 
tion in reshaping it, is to give way progressively to outer authority, to 
uniformity, to discipline and dependence upon the leader. This battlefield 
exists here and now within each of us. The answer to growing complexity 


in the social sphere is renewed efforts at participation by each one of us, 
or else a progressive decline of inert and unquestioning masses, submitting 
to government by an elite which will have little regard for the ultimate 
interest of the common man. 

Now, drawing together the threads of this problem, we are confronted 
with the following facts: 

1. Since the industrial revolution there has been increasing difficulty on 
the part of the ordinary citizen in comprehending and affecting the forces 
which control his destiny. 

2. Potentially the individual is a member of many, many publics, de- 
fined as groups of people having a common interest, for example, as voters, 
motorists, veterans, employers, consumers, co-religionists. 

3. No public includes all of an individual's interests. 

To these facts we add our earlier conclusions, namely, that 

4. Activity alone is not participation. Most of our fellow citizens spin 
as cogs in many systems without engaging their own egos even in those 
activities of most vital concern to them. 

5. When the ego is not effectively engaged the individual becomes re- 
active. He lives a life of ugly protest, finding outlets in complaints, strikes, 
above all in scapegoating; in this condition he is ripe prey for a demagogue 
whose whole purpose is to focus and exploit the aggressive outbursts of 
non-participating egos. 


It is risky indeed to suggest in a few words the solution of such an 
immense social problem. Certainly it will require the combined efforts of 
educators, statesmen, and scientists to rescue the common man from his 

But from our preceding discussion one line of thought stands out as 
particularly helpful. 

Is it not true that all of us find coercive demands upon our motor sys- 
tems imposed by the corporate cycles in which we move, generally without 
serious frustration resulting? Speaking for myself, only the outer layers of 
my personality are engaged in my capacity as automobile owner, insurance 
holder, Blue Cross member, consumer of clothing, patron of the IRT. Per- 
haps, you say, I should be more interested in these cycles, but I reply one 
must choose, and other things are more important to me. In this age of 
specialization all of us are willing to delegate expert functions to experts. 
We simply cannot be bothered about the innumerable technical aspects of 
living that are not our specialty. To be sure, in matters of broad political 
or ethical policy-making the story is different; we cannot so easily avoid 
responsibility. Political reforms making possible good schools, recreation, 
and health are presumably the concern of all people. National policy in 
securing a lasting peace is a matter of great moment for each one of us. 


But even among these broad social and political issues I find some that 
excite me more than others. 

What I am saying is that I cannot share Dewey's dismay at our failure 
I to create innumerable self-conscious publics wherever there are common 
\interests. In the first place, these publics need operate only on the broadest 
policy-forming level; and, in the second place, a relatively few members 
of a group can often serve adequately as representatives of others who are 
like-minded. I do not mean that a few public spirited citizens should do 
all the work. There should be wider distribution of responsibility. But my 
point is that talents differ. What warms one ego chills another. 
/" Now assuming that the major fields of activity open to all normal people 
/ are the economic, the educational, recreational, political, religious and 
domestic, we might assert that a healthy ego should find true participation 
in all of them. Or allowing one blind spot to the bachelor, to the consti- 
tutional hater of sports or of politics, to the agnostic, there is still need 
for a balanced diet of participation in, say, five fields. 

Against some such norm we might test our present situation. Do we find 
Citizen Sam truly participating in some one political undertaking; in 
some one of his economic contacts (preferably, of course, in his job where 
he spends most of his time); is he really involved in some religious, edu- 
cational, recreational pursuits, and in family affairs? If we find that he is 
not actively involved in all of these areas of participation, we may, as I 
say, grant him a blind spot or two. But unless he is in some areas ego- 
engaged and participant his life is crippled and his existence a blemish 
on democracy. 

I In brief, it is neither possible nor desirable that all of our activities 
/ and contacts in our complex social order should penetrate beneath the 
I surface of our personalities. But unless we try deliberately and persistently 
to affect our destinies at certain points, especially where broad political 
policies are concerned, and in some of the other representative areas of 
our life, we are not democratic personalities, we have no balance or whole- 
ness, and society undergoes proportionate stultification. 


Most of you are aware of the benefits and the social and psychological 
implications of participation in a work situation. By participation we mean 
giving supervisors and employes an increasing part in helping to determine 

* Robert E. Schwab, "Personnel Planning Supervisor," The Detroit Edison Com- 
pany. Presented to: The Cincinnati Chapter of the Society for the Advancement of 
Management, Oct. 2, 1952, pp. 1-4, 9-13. 


the policies, objectives, and methods used in an organization. I think most 
of you practice participation in some things. At Detroit Edison, if we differ 
at all, it is only in the degree to which the principle of participation is 
applied. The way was paved for our moving a little further, perhaps, by a 
long history of management concern for the individual employee. During 
the past five or six years we have been aware of the values of participation 
and sought to extend it where it seemed to have value. We have also done 
considerable research to find out whether participation really has benefits 
in terms of better morale and improved operations. Only if it brings better 
results can we consider it an aid to the industrial organization. 

Actually, the idea of participation isn't new — it is probably as old as 
the human values that brought democracy into the system of world gov- 
ernments. In our own country back in 1912, the Congress of the United 
States appointed a Commission on Industrial Relations, which made an 
intensive study of problems of the industrial organization. Among their 
findings, issued in 1914, this Commission says, "The question of industrial 
relations assigned by Congress to the Commission for investigation is more 
fundamental and of greater importance to the welfare of the nation than 
any other question except, perhaps, the form of government. The only 
hope for the solution of the tremendous problems created by industrial 
relations lies in the effective use of our democratic institutions and in the 
rapid extension of the principles of democracy to industry." 

I don't know what happened to their findings, but certainly for a good 
many years we lost sight of the principles of democracy as they might be 
applied in industry. It is only in the last few years that we are really coming 
to feel that in our "way of life" there may be an answer to many of our 
industrial problems. Tonight, I would like to show you a few of the ways 
that we have tried to extend participation in the Detroit Edison Company 
and give you some evidence that it brings tangible benefits. 

Participation, as we know it in industry, travels under a great many 
aliases. Most of you are familiar with the terms "consultative supervision," 
"multiple management," "bottom-up management," and more recently 
perhaps "democratic supervision," "group management," etc. These par- 
ticipative techniques differ in purpose and degree, but all have the same 
general objective — that of extending the principle of participation in prob- 
lems involving decision making and policy development in the industrial 
organization. This principle, if extended is used for one reason only — 
because it results in more effective operations. In other words, it's got to 
work — or those of us here tonight can't be concerned with it. It does result 
in more effective operation, we believe, through better understanding, 
wider acceptance of the goals of the organization, greater motivation to 
get things done that need to be done, and greater satisfaction on the part 
of all people who are involved. 

I want to show you first a chart which will help me define participation 
as we are talking about it this evening. What I have tried to do is set down 



some of the dimensions of participation as it might be used in any company. 
First of all, there is the scope of its use. It might be used in very narrow 
or limited matters — you might consult with a few people on relatively un- 
important matters. 

Going further along the line toward full participation, you might use it 
on some selected subjects — management could decide to share some rela- 
tively important problems with some groups or some employees. Or man- 
agement might say "we are going to bring people in on everything that is 
of real concern to them." 






























Degrees of Participation 

Another dimension is the frequency of use of participation in your or- 
ganization. You might use it very infrequently. On occasion, you might 
think to ask somebody their opinion and perhaps give some consideration 
to their reactions. You might have occasional or periodic meetings, in which 
you would share certain problems with various levels of supervision or even 
non-supervisory employees. The multiple management idea is that sort of 
thing. Or you might go further in that direction on frequency of use, and 
make participation consistently a "way of life" in those things that are of 
real concern to the people in your organization. 

A third dimension of participation covers the persons who would be in- 
volved in this problem sharing. You might have a selected few that you 
would involve. Normally it would be your top management group that you 
share problems with, or you might extend certain things to higher levels 
of supervision or committees. Some of you may have special committees to 
study and recommend on certain problems. At the full participation level 
you might bring all supervisors in on important things, or even try to in- 
volve all employees in some way. 

The fourth dimension of participation would be the part the people take 
— how do they participate? We have heard a lot about communication and 
how communication can solve problems in the organization. You might 


keep people informed and keep an ear to the ground to see how they react, 
and even modify your decisions on that basis. This is a rather narrow, 
limited kind of participation. You might go further and consult with those 
who will be affected by a decision — get their ideas and reaction. Your de- 
cision is made after consultation. Group decision is a kind of full par- 
ticipation in which a work group shares problems and has a voice in de- 
cisions. "Democratic supervision" is based on the idea of sharing decisions 
on some problems with the work group. 

Somewhere on this chart every organization can spot its present level 
of participation. We are talking tonight about moving from limited kinds 
of participation towards a fuller participation. We are not talking about 
one particular kind of participation — we are not talking about demo- 
cratic supervision or consultative supervision. We are talking about the 
principle of participation — of bringing more and more people in — of be- 
ing more concerned with their ideas on problems that affect them. The 
extent to which any of us will use participation depends a great deal upon 
our basic philosophy of management, on which we think is the best way 
to get results in an organization. It will depend a lot upon our understand- 
ing of the benefits of participating, and it will depend a great deal upon 
the experience of success we have in using participation in the solution 
of our company's problems. 

Participation is no panacea. To be effective it must be used with convic- 
tion and sincerity . . . because you really believe that having shared a 
problem with people who have a right to be concerned with it, you get 
better results — greater acceptance — more effective motivation to get the 
job done. It has to be sincere; it cannot be manipulation. 

Sharing problems requires some degree of skill. There has to be some 
training involved. As you move toward more participation there are skills 
of working with individuals and groups of people that all of us have to 
learn more about, if we are going to be effective. We also must recognize 
that until we do develop these skills we are going to have new kinds of 
organizational problems when we extend participation. 

The Role and Conditions of Leadership 

The work situation, extra-organizational affiliations, like-mindedness, and 
symbols and insignia provide some of the materials out of which identifica- 
tions develop or can be created. Very often individuals who take a role of 

*Herbert A. Simon, Donald W. Smithburg, and Victor A. Thompson, Public Admin- 
istration (New York: Alfred A. Knopf, Inc., 1956), pp. 102-8. 


leadership play an important part in crystallizing these potential identi- 
fications into strong, cohesive working groups. A leader — even one with 
strong natural capabilities — cannot force a social group into being where 
there is no basis for it in common tasks, beliefs, affiliations, or symbols; 
but he can often act as catalyst, and he can sometimes decide the issue 
between two alternative closely-balanced group structures. A strong leader 
can sometimes forge his unit into a working group where diverse profes- 
sional loyalties of its members might otherwise disrupt it. 

Leaders are important in other ways than in the formation of new 
groups. They perform important tasks in holding together groups already 
in existence. In most organizations, by virtue of their dual membership in 
the working group composed of their subordinates and the executive group 
composed of their colleagues and their superior, they also perform the 
function of tying the numerous working groups to the goals and programs 
of the organization as a whole. They provide part of the connective tissue 
that makes of the organization something more than a collection of small, 
independent, self-centered groups. 

Meaning of Leadership 

A leader may be denned as a person who is able to unit people in pursuit 
\of a goal. Leadership is always a matter of degree, the strength of influence 
depending upon the personal qualities of the leader as related to the quali- 
ties of those he attempts to influence and the situation surrounding the 

The acceptability of a person as leader will depend, first, upon the recog- 
nition in him by his followers of qualities of excellence — qualities that 
give them confidence in him and make them willing to accept his influence. 
Superior intelligence, training, or experience may provide a partial basis 
for leadership. -The quaJity^QLMQendance^— the tendency to take the in- 
itiative in interpersonal relations, to direct attention, to suggest solutions — 
is usually important. Proper professional status is often essential — engi- 
neers will be inclined to accept the leadership of another engineer — as 
is the sharing of beliefs and attitudes by leader and led and his ability to 
"talk their language." 

To the extent that the group accepts the organization's formal status 
system, leadership can be earned by gaining formaL^xisition — placing a 
man in the position of branch chief may by itself give him influence over 
the members of the branch. Formal position gains additional influence 
from the sanctions at its disposal. The branch chief can block promotions 
and raises; he can make his subordinates' work more or less pleasant or 
easy. On this basis, we can distinguish "formal" leadership — influence de- 
rived from formal organization position — from "natural" leadership — in- 
fluence derived from the recognition of personal excellence. In most situa- 
tions, of course, these two kinds of influence are combined to a greater or 
lesser degree. 
( The important thing is not that the leader possess superior qualities, 


>but that his followers believe that he possesses these qualities. Leadership 
is almost always surrounded by a halo. The followers are seldom in a posi- 
tion to judge accurately all the personal qualities of the leader. If he can 
maintain a high level of group loyalty, they will be quite prepared to 
believe that he is intelligent or well-informed. The influence of the ac- 
cepted leader is greatly enhanced by this quite common tendency of fol- 
lowers to idealize him. Figures like Gifford Pinchot in the U.S. Forest 
Service, or Daniel Hoan, former mayor of Milwaukee, have come to serve 
as symbols of the organizations they led, and the accomplishments of their 
organizations are attributed — probably to a considerably exaggerated ex- 
tent — to their personal qualities. 

CThe leader's influence is always dependent upon the situation. That is 
hy great crises make great Presidents (although not all Presidents in great 
crises are great). Seldom, if ever, does the leader have power to alter the 
more basic attitudes, values, and beliefs of his followers. Rather, as sug- 
gested above, his role is to resolve these attitudes and beliefs into an agreed- 
upon program of action. He is a broker of idea s and values who, by com- 
promise and persuasion, secures assent to policies and proposals. Success- 
ful leadership is difficult unless the leader shares most of the values of the 
group, for if he does not, the burden of compromise on him will be too 
great. A chief of the Bureau of Agricultural Economics who did not be- 
lieve in the general principle of "parity" — or who exhibited his disbelief — 
would not long retain any considerable influence in the Department of 
Agriculture. A person who thought all unemployed workers were ne'er-do- 
wells could exert only a negative influence on a group of social workers. 

Leadership is also difficult unless the leader is highly sensitive to the 
attitudes of his followers — whether consciously or because he shares these 
attitudes. Lacking such sensitivity, he will not know at what point com- 
promise is necessary in order to retain his influence and the cohesion of 
the group. He will not be able to avoid issues on which the group is badly 
split, and which would have a disruptive effect. This sensitiveness is a 
quality that both the friends and most of the enemies of Franklin D. Roose- 
velt agree that he possessed to a very high degree. 

In summary, leadership is a two-way, rather than a one-way, process. 
How far the "great man" can actually change the course of history is a 
/ matter of debate. It is certain, however, that to a very large extent the 
leader must lead in a direction his followers want to follow. 

The Leader's Identifications 

Within a working group there is nearly always a recognized leader, 
whether he be the unit chief, the section chief, the branch chief, or a natu- 
ral leader without position in the formal hierarchy. This leader is the 
recognized representative of the working group in its relations with the 
rest of the organization or with persons outside the organization. He be- 
comes a rallying point, a symbol of the group's oneness. 

The formally designated head of the unit is in favorable position to 


assume leadership of the group, and more often than not he is the recog- 
nized leader. However, his position in the organization, and the fact that 
he is designated from "outside," place him in a position somewhat differ- 
ent from that of informal natural leaders. In the first place, his desires for 
further advancement urge him to identify with larger organization units 
rather than with the group of his subordinates. In the second place, his 
membership in other working groups of executives may create competing 
pulls on his loyalties. Each of these points deserves attention. 

Personal Ambition. Whether the leader identifies with the working 
, group or with "the administration" will often depend upon how ambitious 
\for personal advancement he is. Since promotion in an organization is an 
accepted symbol of personal success, an individual with very strong per- 
sonal ambitions will usually try to rise in the hierarchy as fast as he can. 
He may feel that he cannot afford to be stopped on the way by emotionaL 
attachments to a working group and may therefore identify with the ad- 
ministration, the source of his personal satisfactions. 1 

The extent to which ambition will conflict with group loyalty depends 
to a large degree upon how completely the leader's personal ambitions 
have already been satisfied. Often, in units performing clerical jobs an old 
and faithful employee without the education needed for professional posi- 
tions is promoted to the position of supervisor. Since he knows he cannot 
advance any further and does not particularly want to, such a supervisor 
often identifies very strongly with his subordinates and does all he can to 
protect their interests. 

On the other hand, a young ambitious college man placed in the same 
supervisory position has only begun to satisfy his ambitions and will very 
likely identify with the administration. By the time this same ambitious 
young man has become a division chief in a government agency and finds 
himself in charge of some important governmental program he may decide, 
however, that the social values of his program mean more to him than 
climbing another step in the hierarchy. Thus he may fight for his program 
and staff against the interference of the bureau or agency, or even the chief 
executive or the legislative body. In a crisis, he may decide to resign rather 
than compromise his program and "double cross" his staff. 

Personal ambition is a factor in most human situations. Virtually all 
leaders will at some time make decisions that reflect more their own ambi- 
tion than the welfare of the group, the goals of its program, the goals of 
the agency, or even the best interests of the nation. Often they will so 
successfully rationalize their decision in terms of group values that they 
will be entirely unconscious of their own motivation. Subordinates not 
infrequently find that their proposals are blocked because acceptance of 
them would have damaging effects on the careers of their bosses. 

l For an excellent case study of the relation between the leader's loyalty to his group 
and his advancement, see William F. Whyte, Street Corner Society (Chicago: University 
of Chicago Press, 1943), especially chap. 3. 


Dual Loyalty. Apart from a possible conflict with personal ambition, a 
unit head's loyalty to his group may also conflict with his loyalty to an 
executive unit organization. Indeed, such conflicts, minor and major, are 
of everyday occurrence in organizations. A police sergeant, for example, 
may be instructed that his patrolmen on the night shift are spending too 
much time eating pie in an all night restaurant and too little time pa- 
trolling. He may recognize the force of the complaint and yet feel that 
some allowance should be made for the men, who are generally doing (he 
believes) a good job. The sergeant's reaction to the competing demands 
of his superiors and his working group will depend on the relative strengths 
of his loyalties. In such situations it is hardly possible to generalize about 
the result, except to say that in some cases one loyalty, in some cases the 
other, wins out. 

Confronted with such a conflict, the leader will probably do his best to 
persuade the one group or the other (or both) to change its position so 
that conflict will be avoided or resolved. To the extent that he is genuinely 
identified with both groups, he will feel a strong need to retain the con- 
fidence, respect, and friendship of the members of both, and the organiza- 
tional conflict will become a conflict within his own personality. Out of 
such conflicts arises one of the most important functions of an executive — 
the function of reconciling the values and goals of the group he leads with 
the objectives of the larger organization units. 

On the one hand, if the leader identifies with the working group, he may 
fail to bring that group into the larger cooperative system. (The patrolmen 
continue to eat their accustomed portions of pie.) His section or branch 
may no longer make its expected contribution to the goals set by the ad- 
ministrators at the higher levels of the hierarchy. If this condition persists, 
the entire organization may be endangered, or the administration may take 
steps to depose the leader and appoint another. 

On the other hand, if the group leader identifies with the administra- 
tion — if he does not fully accept the group's values or protect them when 
they conflict with the goals of the bureau or agency — the morale of the 
working group may be destroyed. If some group identification remains, the 
group will begin to reject the unit head, to take steps to protect itself 
against him, and to develop its own natural leaders. (The patrolmen may 
seek to conceal their activities from the sergeant.) The basic test whereby 
the group judges its leader is how he performs in such conflict situations. 
The leader is expected by them to be on their side and to use his prestige 
and ability — and that of his superiors, if possible — to protect the group. 



The discussion of relationships among people at work is written from 
the point of view of dynamic psychology which, because of its origin in the 
clinic, directs attention to the whole individual living and interacting 
within a world of other individuals. Life, from the point of view of dynamic 
psychology, is a continuous striving to satisfy ever-changing needs in the 
face of obstacles. The work life is but a segment — although a large one — 
of the whole. 

The Setting 

Within this framework we shall examine some of the important forces 
and events in the work situation which aid or hinder the individual as he 
strives to satisfy his needs. First of all, we must recognize a fundamental 
fact: the direct impact of almost all these forces upon the individual is 
\through the behavior of other people. This is obvious when we speak of 
an order from the boss, or pressures exerted by fellow workers to get the 
individual to join a union. It is perhaps less obvious when we speak of 
the impact of the business cycle, or the consequences of a fundamental 
technological change. Nevertheless, the direct influence of these forces on 
the individual — whether he is a worker or a plant manager — occurs 
through the medium of the actions of other people. We must include not 
only the easily observed actions of others, but subtle, fleeting manifestations 
of attitude and emotion to which the individual reacts almost uncon- 

For purpose of discussion we may arbitrarily divide the actions of other 
people which influence the individual in the work situation into three 
classes: actions of superiors, of subordinates, and of associates. We shall 
limit our attention mainly to the actions of superiors as they affect the 
subordinate in his striving to satisfy his needs. This relationship is logically 
prior to the others, and it is in many ways the most important human 
relationship in industry. 

The fundamental characteristics of the subordinate-superior relation- 
ship are identical whether one talks of the worker and the supervisor, the 
assistant superintendent and the superintendent, or the vice-president and 
the president. There are, to be sure, differences in the content of the re- 
lationship, and in the relative importance of its characteristics at different 

* Douglas McGregor, "Conditions of Effective Leadership in the Industrial Organiza- 
tion," Journal of Consulting Psychology, Vol. VIII (March-April, 1944), pp. 55-63. 


levels of the industrial organization. The underlying aspects, however, are 
common to all levels. 

The Dependence of the Subordinate 

The outstanding characteristic of the relationship between the subordi- 
nate and his superiors is his dependence upon them for the satisfaction of 
his needs. Industry in our civilization is organized along authoritative lines. 
In a fundamental and pervasive sense, the subordinate is dependent upon 
his superiors for his job, for the continuity of his employment, for pro- 
motion with its accompanying satisfactions in the form of increased pay, 
responsibility, and prestige, and for a host of other personal and social 
satisfactions to be obtained in the work situation. 

This dependence is not adequately recognized in our culture. For one 
thing, it is not consistent with some of our basic social values. The emphasis 
is usually placed upon the importance of the subordinate's own efforts in 
achieving the satisfaction of his needs. Nevertheless, the dependence is real, 
and subordinates are not unaware of it. Among workers, surveys of atti- 
tudes invariably place "fair treatment by superiors" toward the top of the 
list of factors influencing job satisfaction. And the extent to which unions 
have attempted to place restrictions upon management's authority reflects 
not only a desire for power but a conscious attempt to reduce the depend- 
ence of workers upon their bosses. 

Psychologically the dependence of the subordinate upon his superiors 
s a fact of extraordinary significance, in part because of its emotional 
similarity to the dependence characteristic of another earlier relationship: 
that between the child and his parents. The similarity is more than an 
analogy. The adult subordinate's dependence upon his superiors actually 
reawakens certain emotions and attitudes which were part of his childhood 
relationship with his parents, and which apparently have long since been 
outgrown. The adult is usually unaware of the similarity because most of 
this complex of childhood has been repressed. Although the emotions influ- 
ence his behavior, they are not accessible to consciousness under ordinary 

Superficially it may seem absurd to compare these two relationships, but 
one cannot observe human behavior in industry without being struck by 
the fundamental similarity between them. Space limitations prevent elabo- 
ration of this point here, in spite of its great importance. 

There are certain inevitable consequences of the dependence of the sub- 
ordinate upon his superiors. The success or failure of the relationship 
depends on the way in which these consequences are handled. An under- 
standing of them provides a more useful basis than the usual "rule of 
thumb" for a consideration of problems of industrial relations. These con- 
sequences of the dependence of the subordinate will be discussed under 
two main headings: 1) the necessity for security in the work situation, and 
2) the necessity for self-realization. 


The Necessity for Security 

Subordinates will struggle to protect themselves against real or imagined 
threats to the satisfaction of their needs in the work situation. Analysis of 
this protective behavior suggests that the actions of superiors are frequently 
perceived as the source of the threats. Before subordinates can believe that 
it is possible to satisfy their wants in the work situation, they must acquire 
a convincing sense of security in their dependent relationship to their 

Management has recognized the financial aspects of this need for se- 
curity, and has attempted to provide for it by means of employee retirement 
plans, health and accident insurance, the encouragement of employee credit 
unions, and even guaranteed annual wages. However, this recognition does 
not get at the heart of the problem: the personal dependence of the sub- 
ordinate upon the judgments and decisions of his superior. 

Labor unions have attacked the problem more directly in their attempts 
to obtain rules governing promotions and layoffs, grievance procedures, 
arbitration provisions, and protection against arbitrary changes in work- 
loads and rates.' One .important purpose of such "protective" features in 
union contracts is to Restrict superiors in the making of decisions which, 
from the worker's point of view, are arbitrary and threatening. They help 
to provide the subordinate with a measure of security despite his depend- 
ence on his superiors. 

The Conditions of Security: an Atmosphere of Approval 

There are three major aspects of the subordinate-superior relationship — 
at any level of the organization — which affect the security of the subordi- 
nate. The most important of these is what we may term the "atmosphere" 
created by the superior. This atmosphere is revealed not by what the su- 
perior does but by the manner in which he does it, and by his underlying 
attitude toward his subordinates. It is relatively independent of the strict- 
ness of the superior's discipline, or the standards of performance which he 

A foreman who had unwittingly created such an atmosphere attempted 
to establish a rule that union officials should obtain his permission when 
they left the job to meet with higher management, and report to him 
when they returned. This entirely reasonable action aroused intense re- 
sentment, although the same rule was readily accepted by union officials 
in another part of the plant. The specific actions were unimportant except 
in terms of the background against which the subordinates perceived them: 
an atmosphere of disapproval in the one case and of approval in the other. 

Security for subordinates is possible only when they know they have the 
genuine approval of their superior. If the atmosphere is equivocal, or one 
of disapproval, they can have no assurance that their needs will be satis- 


fied, regardless of what they do. In the absence of a genuine attitude of 
approval subordinates are threatened, fearful, insecure. Even neutral and 
innocuous actions of the superior are regarded with suspicion. Effective dis- 
cipline is impossible, high standards of performance cannot be maintained, 
"sabotage" of the superior's efforts is almost inevitable. Resistance, an- 
tagonism and ultimately open rebellion are the consequences. 

The Conditions of Security: Knowledge 

The second requirement for the subordinate's security is knowledge. He 
must know what is expected of him. Otherwise he may, through errors of 
commission or omission, interfere with the satisfaction of his own needs. 
There are several kinds of knowledge which the subordinate requires: 

1. Knowledge of over-all company policy and management philosophy. 
Security is impossible in a world of shifting foundations. This fact was 
convincingly demonstrated — to management in particular — during the 
first few months of the existence of the War Labor Board. The cry for a 
national labor policy was frequently heard. "Without it we don't know 
how to act." Likewise, subordinates in the individual company require a 
knowledge of the broad policy and philosophy of top management. 

2. Knowledge of procedures, rules and regulations. Without this knowl- 
edge, the subordinate can only learn by trial and error, and the threat of 
punishment because of innocent infractions hangs always over his head. 

3. Knowledge of the requirements of the subordinate's own job; his 
duties, responsibilities, and place in the organization. It is surprising how 
often subordinates (particularly within the management organization) are 
unable to obtain this essential knowledge. Lacking it, one can never be 
sure when to make a decision or when to refer the matter to someone else; 
when to act or when to "pass the buck." The potential dangers in this kind 
of insecurity are apparent upon the most casual consideration. 

4. Knowledge of the personal peculiarities of the subordinate's immedi- 
ate superior. The good salesman never approaches a new prospect without 
learning all he can about his interests, habits, prejudices, and opinions. 
The subordinate must sell himself to his superior, and consequently such 
knowledge is indispensable to him. Does the boss demand initiative and 
originality, or does he want to make all the decisions himself? What are 
the unpardonable sins, the things this superior never forgives or forgets? 
What are his soft spots, and what are his blind spots? There can be no 
security for the subordinate until he has discovered the answers to these 

5. Knowledge by the subordinate of the superior's opinion of his per- 
formance. Where do I stand? How am I doing? To know where you stand 
in the eyes of your superiors is to know what you must do in order to satisfy 
your needs. Lacking this knowledge, the subordinate can have, at best, 
only a false sense of security. 

6. Advance knowledge of changes that may affect the subordinate. Re- 


sistance to change is a common phenomenon among employees in industry. 
One of the fundamental reasons is the effect of unpredictable changes upon 
security. If the subordinate knows that he will always be given adequate 
warning of changes, and an understanding of the reasons for them, he does 
not fear them half so much. Conversely, the normal inertia of human habits 
is tremendously reinforced when one must be forever prepared against un- 
foreseen changes in policy, rules, methods of work, or even in the continuity 
of employment and wages. 

It is not necessary to turn to industry for evidence in support of the 
principles outlined above. Everywhere in our world today we see the con- 
sequences of the insecurity caused by our inability to know what we need 
to know in order to insure even partially the satisfaction of our needs. 
Knowledge is power, primarily because it decreases dependence upon the 
unknown and unpredictable. 

The Conditions of Security: Consistent Discipline 

The third requirement for the subordinate's security in his relationship 
of dependence on his superiors is that of consistent discipline. It is a fact 
often unrecognized that discipline may take the form of positive support 
for "right" actions as well as criticism and punishment for "wrong" ones. 
The subordinate, in order to be secure, requires consistent discipline in 
both senses. 

He requires first of all the strong and willing backing of his superiors 
for those actions which are in accord with what is expected of him. There 
is much talk among some managements about superiors who fail to "back 
up" their subordinates. The insecurity that arises when a subordinate does 
not know under what conditions he will be backed up leads him to "keep 
his neck pulled in" at all times. Buck-passing and its consequent frictions 
and resentment are inevitable under such circumstances. 

Given a clear knowledge of what is expected of him, the subordinate re- 
quires in addition the definite assurance that he will have the unqualified 
support of his superiors so long as his actions are consistent with those 
policies and are taken within the limits of his responsibility. Only then 
can he have the security and confidence that will enable him to do his job 

At the same time the subordinate must know that failure to live up to 
his responsibilities, or to observe the rules which are established, will result 
in punishment. Every individual has many wants which conflict with the 
demands of his job. If he knows that breaking the rules to satisfy these 
wants will almost inevitably result in the frustration of his vital long-range 
needs, self-discipline will be less difficult. If, on the other hand, discipline 
is inconsistent and uncertain, he may be unnecessarily denying himself 
satisfaction by obeying the rules. The insecurity, born of uncertainty and 
of guilt, which is inevitably a consequence of lax discipline, is unpleasant 
and painful for the subordinate. 


What frequently happens is this: The superior, in trying to be a "good 
fellow," fails to maintain discipline and to obtain the standards of per- 
formance which are necessary. His subordinates — human beings striving to 
satisfy their needs — "take advantage of the situation." The superior then 
begins to disapprove of his subordinates (in spite of the fact that he is to 
blame for their behavior). Perhaps he "cracks down" on them, perhaps he 
simply grows more and more critical and disapproving. In either event, 
because he has failed to establish consistent discipline in an atmosphere of 
genuine approval, they are threatened. The combination of guilt and in- 
security on the part of the subordinates leads easily to antagonism, and 
therefore to further actions of which the superior disapproves. Thus a 
vicious circle of disapproval — antagonistic acts — more disapproval — more 
antagonistic acts is set up. In the end it becomes extremely difficult to 
remedy a situation of this kind because both superior and subordinates 
have a chip-on-the-shoulder attitude which must be abolished before the 
relationship can improve. 

Every subordinate, then, requires the security of knowing that he can 
count on the firm support of his superiors for doing what is "right," and 
firm pressure (even punishment) to prevent his doing what is "wrong." 
But this discipline must be established and maintained in an atmosphere 
of approval. Otherwise, the subordinate's suspicion and resentment of his 
superiors will lead to the opposite reaction from the desired one. A mild 
degree of discipline is sufficient in an atmosphere of approval; even the 
most severe discipline will in the end be unsuccessful in an atmosphere 
of disapproval. The behavior of the people in the occupied countries of 
Europe provided a convincing demonstration of this psychological prin- 

The Necessity for Independence 

When the subordinate has achieved a reasonable degree of genuine se- 
j curity in his relationship to his superiors, he will begin to seek ways of 
utilizing more fully his capacities and skills, of achieving through his own 
efforts a larger degree of satisfaction from his work. Given security, the 
subordinate seeks to develop himself. This active search for independence 
is constructive and healthy. It is collaborative and friendly, yet genuinely 

If on the other hand, the subordinate feels that his dependence on his 
superiors is extreme, and if he lacks security, he will fight blindly, for free- 
dom. This reactive struggle for independence is founded on fear and 
hatred. It leads to friction and strife, and it tends to perpetuate .itself 
because it interferes with the development of an atmosphere of approval 
which is essential to security. 

These two fundamentally opposite ways in which subordinates seek to 
acquire independence have entirely different consequences. Since we are 
concerned with the conditions of the successful subordinate-superior rela- 


tionship, we shall emphasize the active rather than the reactive striving 
for independence. 

The Conditions of Active Independence: Participation 

One of the most important conditions of the subordinate's growth and 
development centers around his opportunities to express his ideas and to 
contribute his suggestions before his superiors take action on matters which 
involve him. Through participation of this kind he becomes more and 
more aware of his superiors' problems, and he obtains a genuine satisfac- 
tion in knowing that his opinions and ideas are given consideration in the 
search for solutions. 

Participation of this kind is fairly prevalent in the upper levels of indus- 
trial organizations. It is often entirely lacking further down the line. Some 
people insist that the proponents of participation at the lower levels of 
industry are unrealistic idealists. However, there are highly successful in- 
stances in existence of "consultative supervision," "multiple management," 
and "union-management cooperation." The important point is that par- 
ticipation cannot be successful unless the conditions of security are ade- 
quately met. Many failures among the wartime Labor-Management Pro- 
duction Drive Committees could be traced directly to this fundamental 
fact that active independence cannot be achieved in the absence of ade- 
quate security. 

There is a real challenge and a deep satisfaction for the subordinate who 
is given the opportunity to aid in the solution of the difficult but fasci- 
nating problems that arise daily in any industrial organization. The su- 
perior who, having provided security for his subordinates, encourages them 
to accept this challenge and to strive with him to obtain this satisfaction, 
is almost invariably surprised at the fruitfulness of the results. The presi- 
dent of one company remarked, after a few management conferences de- 
signed to encourage this kind of participation, that he had never before 
realized in considering his problems how many alternative possibilities 
were available, nor how inadequate had been the knowledge upon which 
he based his decisions. Contrary to the usual opinion, this discovery is as 
likely at the bottom of an organization as at the top, once the initial feel- 
ings of inadequacy and hesitancy among workers are overcome. 

The genuine collaboration among all the members of an industrial or- 
ganization which is eulogized by "impractical idealists" is actually quite 
possible. But it can only begin to emerge when the mechanisms of genuine 
participation become an established part of the organization routines. 

Conditions of Active Independence: Responsibility 

A corollary of the desire for participation is a desire for responsibility. It 
is another manifestation of the active search for independence. Insecure 
or rebellious subordinates — seeking independence in the reactive sense — 
do not accept responsibility. They are seeking freedom, not the oppor- 
tunity for self-realization and development. 


The willingness to assume responsibility is a genuine maturational phe- 
nomenon. Just as children cannot grasp the meaning of the algebraic use 
of symbols until their intellectual development has reached a certain level, 
so subordinates cannot accept responsibility until they have achieved a 
certain degree of emotional security in their relationship to their superiors. 
Then they want it. They accept it with obvious pleasure and pride. And 
if it is given to them gradually, so that they are not suddenly made insecure 
again by too great a load of it, they will continue to accept more and more. 

The process of granting responsibility to subordinates is a delicate one. 
There are vast individual differences in tolerance for the inevitable pres- 
sures and insecurities attendant upon the acceptance of responsibility. 
Some subordinates seem to be content to achieve a high degree of security 
without independence. Others thrive on the risks and the dangers of being 
"on their own." However, there are few subordinates whose capabilities in 
this direction are fully realized. It is unwise to attribute the absence of a 
desire for responsibility to the individual's personality alone until one has 
made certain that his relationship to his superiors is genuinely secure. 

Many superiors are themselves so insecure that they cannot run the risk 
of being responsible for their subordinates' mistakes. Often they are un- 
consciously afraid to have capable and developing subordinates. The dele- 
gation of responsibility, as well as its acceptance, requires a confident and 
secure relationship with one's superiors. 

Conditions of Active Independence: The Right of Appeal 

There are occasions when subordinates differ radically but sincerely 
with their superiors on important questions. Unless the superior follows 
an "appeasement" policy (which in the end will cost him his subordinates' 
respect), there exists in such disagreement the possibility of an exaggerated 
feeling of dependence and helplessness in the minds of the subordinates. 
They disagree for reasons which seem to them sound; yet they must defer 
to the judgment of one person whom they know to be fallible. 

If these occasions are too frequent, the subordinates will be blocked in 
their search for independence, and they may readily revert to a reactive 
'Struggle. The way out of the dilemma is to provide the subordinate with 
,a mechanism for appealing his superior's decisions to a higher level of the 
\organization. The subordinate can then have at hand a check upon the 
correctness and fairness of his superior's actions. His feeling of independ- 
ence is thereby increased. 

This is one of the justifications for an adequate grievance procedure for 
workers. All too often, however, there is no similar mechanism provided 
for members of management. To be sure, in the absence of a union it is 
difficult to safeguard the individual against retaliative measures by his 
immediate superior, but it is possible to guarantee a reasonable degree of 

If the relationship between subordinate and superior is a successful one, 


the right of appeal may rarely be exercised. Nevertheless, the awareness 
that it is there to be used when needed provides the subordinate with a feel- 
ing of independence which is not otherwise possible. 

The Complexity of Leadership 

Investigations into the problems of leadership have followed three gen- 
eral types of procedure. Firstly, the traits of those who have been acknowl- 
edged as great leaders either in the past or the present have been analyzed 
in order to discover what it is that they have in common. Secondly, experi- 
mental groups have been formed, asked to nominate members for the posi- 
tion of leadership, and the nominees have then been studied as in the first 
case. Thirdly, it is to be feared that a great many lists of leadership qualities 
are purely subjective creations which represent nothing but the writer's 
concept of what constitutes "The Great Leader." 

One of the most comprehensive surveys of the literature on leadership 
is that of W. Jenkins who in his "Review of Leadership Studies with Par- 
ticular Reference to Military Problems" (Psych. Rev. 44:1947) summarizes 
the whole field over a period of thirty years. The conclusions he comes to 
are that: 

1. Leadership is specific to the particular situation under investigation. 
Who becomes the leader of a given group engaging in a particular activity 
and what the leadership characteristics are in the given case are a function 
of the specific situation including the measuring instruments employed. 
Related to this conclusion is the general finding of wide variations in the 
characters of leaders who become leaders in similar situations, and even 
greater divergence in leadership behaviour in different situations. 

2. In practically every study leaders showed some superiority over the 
members of their group in at least one of a wide variety of abilities. The 
only common factor appeared to be that leaders in a particular field need 
and tend to possess superior technical competence or knowledge in that 
area. La Piere in his Collective Behaviour comes to similar conclusions. 
In a study of different types of group: rebellious, conversational, rioting, 
revelling, and so on, he shows clearly that what makes for good leadership 
in one situation may actually militate against it in another. 

There are many classifications of leadership, for example those of W. M. 

* J. A. C. Brown, The Social Psychology of Industry (Middlesex, England: Penguin 
Books Ltd., 1956), pp. 220-32. 


Conway (the crowd-compeller, the crowd-exponent, and the crowd-repre- 
sentative), F. C. Bartlett (the institutional, the dominant, and the per- 
suasive), and A. B. Wolfe (the radical, the conservative, and the scientific). 
But these seem to be of little help when we are considering industrial lead- 
ership. It is essential, however, to distinguish between what Kimball Young 
calls "leadership" and what he describes as "headship." The former is that 
form of dominance which is based on a compelling personality, the accept- 
ance of the group, or special knowledge in a given situation. It is essentially 
informal in nature and is related to the needs of the group at a particular 
place or time. The latter is a word referring to formal power which is 
culturally transmitted. A king, a lord, or a tribal chief each possess power 
which is relatively independent of their characteristics as individuals — a 
king is a king and his power stems from the acceptance of the principle of 
kingship by the society over which he rules ... it is an accepted belief that 
the power of management is of this nature, it is presumed to be institu- 
tional in nature and need not be related to personalities. We obey the 
chairman of the company because he is the chairman, the supervisor be- 
cause he is supervisor, and nothing more need be said. But we have seen 
that, whether or not in the legalistic sense this supposition is valid, it is 
clear that management can no longer be regarded as a purely formal 
hierarch of headship. We are concerned with good or bad leadership which 
produces good or bad results both in terms of industrial efficiency and in 
terms of human happiness. "Measured financially, reduced output, high 
labour turnover, and high sickness absence are uneconomic; measured in 
terms of human unhappiness, the person in authority who is not suited as 
a human being to his work is a tragedy." (Dr. May Smith, An Introduction 
to Industrial Psychology). 

When we look at the problem from this point of view, it is seen in a 
totally different light, and the leadership studies which have already been 
discussed will be noted to have the following defects: 

a) They often fail to distinguish between "leadership" and "headship" 
(i.e., between leaders who have been freely chosen by the group and those 
who lead by virtue of formal power). 

b) They tend to assess the leader in terms of material achievement — 
production of goods or wealth in the case of industry, military conquest in 
the case of the general or dictator, and party power in the case of the politi- 
cian. What influence they have had, for better or worse, on the physical 
and psychological well-being of their followers is often ignored. 

c) They fail to note that, even when the leader is genuinely elected or 
put into power by the group, this does not necessarily mean that he is, in 
any objective sense, the man who is best suited to the circumstances. He is 
certainly the man who most closely reflects the feelings of the group, but 
it has to be recognized that a sick group will inevitably select a sick leader. 
For example, the sick society of post-war Germany put into power the sick 
man Hitler, who, while he genuinely represented popular feeling, led the 


society to its downfall, and the aggressively sick, industrial group puts an 
agitator into power who, likewise, will not be able to solve its problems. 
So, although psychologically it is true to say that a group always selects 
the leader who seems best fitted to deal with the problems of the moment, 
the man whose personality is an epitome of the group attitudes of the mo- 
ment, it is entirely wrong to conclude that this man is always the one who 
is objectively the best choice. Since the leader reflects the attitudes of the 
group in this way, only the healthy group can select the best type of leader 
in a given situation. 

The leadership studies of the sociologists are, in the main, quite valid 
when we are considering what sort of people have in fact been selected as 
leaders by various groups in different circumstances, but they do not help 
us to decide what sort of person would be in the best interests of the group 
in the situations found most commonly in industry. Nor do the lists of 
traits supplied by the psychologists prove much more helpful. Qualities 
such as "a sense of justice," "a sense of humour," and "ability to accept 
responsibility" are extremely complex and are not single traits which a 
person either has or has not, any more than "laziness," "shyness," and 
"cowardice" are simple traits which belong to a given individual and 
appear in all the situations in which he acts. It is, of course, self-evident 
that the leader of a healthy group must be reasonably intelligent, reason- 
ably well-balanced, and must not have the sort of rigid, self-centred per- 
sonality which would make him insensitive to the feelings of the group. 
He must, in other words, be capable not only of giving out orders and 
instructions but also of taking in messages from his environment which 
will influence the orders and instructions that he gives. Low intelligence, 
emotional prejudices, and a self-centred outlook make a man unfit to be 
the democratic leader of a healthy group because they are likely to distort 
incoming messages from his environment and adversely influence his abil- 
ity to control it. Mr. Puckey, whose list of leadership qualities includes 
such qualities as the power to co-ordinate, the power to express the common 
aim, the power to reflect the progress of the group, and so on, has under- 
stood this, yet these qualities are not to be found within the leader but in 
the total situation of the leader-in-the-group. Such powers as Mr. Puckey 
describes are not "in" any man, although he may have such basic traits as 
intelligence, a well-balanced personality, and emotional sensitivity to the 
feelings of others which will enable him (other things being equal) to 
bring them about in the situation of group-interaction. Provided that a 
man possesses these essential basic traits, it is likely that he may be in- 
structed in the technique of bringing about group co-operation. 

In order to make this thesis clearer, we may take an analogy from the 
sphere of technology. The earliest types of machine were, for the most 
part, of such a nature that, once started, they went on carrying out certain 
actions with mechanical precision until the man controlling them stopped 
the engine or until they ran out of fuel. Left to themselves, they would 


grind on whether they were being fed with work or not. But to an increas- 
ing degree the modern machine is self-regulating and its work is controlled 
by such devices as the photo-electric cell which regulates the machine by 
passing on to the controls messages from the environment. As a very simple 
example, the ordinary electric heater when turned on will go on giving 
out exactly the same amount of heat regardless of the temperature of the 
room. At most times this may be quite satisfactory, but in very cold weather 
its heat may not be enough and in very hot weather it may be too great. 
The most modern heating system, however, is controlled by a thermostat, 
so that in very cold weather the system regulates itself to give out more 
heat, and in warm weather it gives out less. Whatever the weather, the 
temperature of the room will remain reasonably constant because the sys- 
tem is controlled by messages from the outer environment. The inefficient 
leader is like the old-fashioned machine. His personality is rigid and fixed, 
he receives no messages from the environment, and his leadership is only 
effectual when the emotional climate of the group happens to coincide 
with his own peculiarities. Hitler, for example, or the industrial agitator 
could only make effective leaders when they were in charge of suspicious 
or resentful groups of people; in any other situation they are seen as 
pathetic misfits or dangerous lunatics. Such men may be intelligent, but 
they are men of emotionally prejudiced minds with rigid personalities and 
fixed ideas. On the other hand, the effective leader is like the thermostati- 
cally controlled heating system. He is receptive and his power is under the 
control of the incoming messages which inform him of the changing emo- 
tional climates of his group. This does not mean to imply that his role is 
purely passive, or that he is a chameleon who changes his opinions with 
every swing of emotional climate. On the contrary, while being receptive 
to such swings, he will endeavour to act like a human thermostat in keep- 
ing the climate constant at a healthy level. Nor does it mean that he is 
capable of handling all possible situations. He is not a superman. But he 
will certainly be able to deal with a much wider range of situations than 
the prejudiced man with fixed ideas. In short, his function is to keep the 
emotional climate constant through many changing situations, to keep the 
situations which seem to demand the dictator or the agitator from arising. 
Two statements on the nature of leadership may clarify these points. 
The first is by C. I. Barnard, a leading authority on management, from an 
essay on "The Nature of Leadership" in the book Human Factors in Man- 
agement, edited by S. D. Hoslett. Dr. Barnard writes that the good leader 
in industry may sometimes give the impression that he is "a rather stupid 
fellow, an arbitrary functionary, a mere channel of communication, and a 
filcher of ideas. In a measure this is correct. He has to be stupid enough 
to listen a great deal, he certainly must arbitrate to maintain order and 
he has to be at times a mere centre of communication. If he used only his 
own ideas he would be somewhat like a one-man orchestra, rather than a 
good conductor, who is a very high type of leader." The difficulty, says 


Barnard, is to find people who have these qualities, who are "properly" 
stupid, effective channels of communication, and capable of stealing the 
right ideas. The second statement consists of two quotations from the Tao- 
Te-King, the Taoist scripture of China which dates from about five or six 
hundred years before Christ: 

The best soldier is not soldierly; 

The best fighter is not ferocious; 

The best conqueror does not take part in war; 

The best employer of men keeps himself below them. 

This is called the virtue of not contending; 

This is called the ability of using men. 

The great rulers — the people do not notice their existence; 
The lesser ones — they attach to and praise them; 
The still lesser ones — they fear them; 
The still lesser ones — they despise them. 

The leader who is, in effect, a one-man orchestra is what we shall describe 
as an autocrat. The autocratic ruler shows the following characteristics; he 
gives orders which he insists shall be obeyed, he determines policies for the 
group without consulting them, he gives no detailed information about 
future plans but simply tells the group what immediate steps they must 
take, he gives personal praise or criticism to each member on his own in- 
itiative, and remains aloof from the group for the greater part of the time. 
In other words, like the old-fashioned heating system, he gives out energy 
without regard for the emotional climate which surrounds him. Contrasted 
with this type of leader is the democrat who gives orders only after con- 
sulting the group, sees to it that policies are worked out in group discus- 
sion and with the acceptance of the group, never asks people to do things 
without sketching out the long-term plans on which they are working, 
makes it clear that praise or blame is a matter for the group and partici- 
pates in the group as a member. Of a third type of leader, the laissez-faire 
type, little need be said, except that he does not lead, leaves the group 
entirely to itself, and does not participate. These types may be sub-divided, 
and anyone who is at all acquainted with industry will be able to name 
examples of each of the following types of leader in the various factories 
he has had occasion to visit: 

A. Autocratic leaders 

(1) Strict autocrat 

(2) Benevolent autocrat 

(3) Incompetent autocrat 

B. Democratic leaders 

(1) Genuine democrat 

(2) Pseudo-democrat 

C. Laissez-faire leaders 

These terms are largely self-explanatory. The strict autocrat is stern, strict 
but just according to his principles. He does not delegate authority, and 


his factory is a one-man show. Although not necessarily unkind in himself, 
he acts on the principle that "business is business," and is fond of such 
phrases as "time is money," "if a man shall not work, neither shall he eat," 
"what they want is more money," "a little dose of unemployment is what 
we need," and so on. He usually has Conservative leanings, is a (nominal) 
member of some Church — probably the Church of England, a violent pa- 
triot, an upholder of the master-and-man theory, strongly anti-socialist or 
-communist, and, possibly, anti-feminist and anti-semitic in a mild sort of 
way. He can be quite "decent" to his men, provided that they "know their 
place," and even generous towards members of the rapidly dying-out spe- 
cies known as "faithful servants of the firm." The benevolent autocrat re- 
sembles the foregoing in many respects, but is afflicted by a nonconformist 
conscience. He is probably a Presbyterian, a Methodist, or a Quaker, and 
is burdened by the thought that he has a moral responsibility towards his 
employees in addition to seeing that they turn out the goods. He wants to 
do people good — not in terms of what they want, but rather in terms of 
what he thinks they should have. No improvements in the material sense 
are too good or too expensive for his employees, but they have to take what 
they get, and like it. If he is strongly religious, he may take a considerable 
interest in the beliefs and even the morals of his employees — an interest 
which is not always appreciated. Whilst these two types, whatever their 
faults, are logical and consistent in their outlook, the incompetent auto- 
crat corresponds to what Dr. May Smith describes as the "baby" in man- 
agement. The "baby" has plenty of energy, but is domineering and erratic. 
His praise and blame depend entirely on his own feelings of the moment. 
He wishes to be powerful, but is desperately insecure. "Hence he tends to 
promote, in the absence of effective safeguards, weak rather than strong 
people, and then complains fretfully that nobody can take any responsi- 
bility. He also believes in the all-powerfulness of his wishes, so that when 
he gives an order he fails to envisage the means that often demand much 
work and time, with the result that he harasses his subordinates with frac- 
tious and querulous enquiries as to whether the work is done yet." Un- 
like the other types of autocrat, who are usually honest according to their 
own lights, the incompetent autocrat is completely unscrupulous, and lies, 
bribes, and bullies or takes any measures which he feels will help him to 
attain his goal. 

The genuine democrat has already been described. He is the conductor 
of an orchestra rather than a one-man band, and he realizes that his job 
is to co-ordinate the willing work of his employees. He realizes, too, that a 
firm should be something beyond individual personalities, and that it is the 
sign of good leadership that things will go quite smoothly when he is tem- 
porarily absent. His employees know what they are doing and why, and 
they do not have to pretend in order to get on. Authority is delegated all 
down the line, and all levels of management feel sufficiently secure to con- 
sider the well-being of their subordinates instead of constantly looking up 


the line to make sure that they are being approved. The pseudo-democrat 
may aspire to be this sort of man, but he is too insecure to make a success 
of it, and ends up by being not very different from the "baby" autocrat. 
The only difference is that, in his more penitent sentimental, or convivial 
moments, he tends to adopt an attitude to his subordinates which says: 
"We're all boys together," or, if he is an American, "We're just one big 
happy family." 

The laissez-faire leader is represented by the chairman of the board who 
does not manage, but leaves all responsibility and most of the work to his 
subordinates. Probably a large part of his day is spent in being hospitable 
to visitors and dispensing drinks — he is, in fact, a sort of host on behalf of 
the firm (unless the firm is a very small one, this may be the best sort of 
chairman to have, especially if, by his personality, he acts as a sort of figure- 
head who is ornamental without being a nuisance). But at the lower levels, 
where leaders have to be more than mere figure-heads, the laissez-faire 
leader is less successful. He may be a man who has been given his position 
on grounds of technical knowledge, and who is quite incapable of assuming 
any sort of authority or control over his subordinates or of getting them 
to co-operate. So they just muddle on, virtually leaderless. 

These various types of leader exist, with minor differences, at all levels 
of management. The strict autocrat is the ruthless foreman whose sole con- 
ern is keeping his job and seeing that his men produce the goods. The 
benevolent autocrat may be the decent sergeant-major type of foreman who 
is known to be "all right" when the men do their job, but "gives them 
hell" when they do not. So far as industry is concerned it has long been 
the practice to measure the efficiency of leadership in a group in terms of 
its productivity, and, as we have seen, such a criterion gives some indication 
not only of the technical efficiency of the group but also of its mental 
well-being or morale. Of recent years, however, it has become increasingly 
possible to measure the effects of good or bad leadership or good or bad 
methods of leading in purely human terms. In other words, it has become 
possible accurately to measure the efficiency of leadership by observing its 
effects on those who are led. Some of these effects were demonstrated by 
Lewin, Lippit, and White of the University of Iowa in a series of experi- 
ments designed to find out what effect, if any, was produced on group 
members by various types of social structure. Schoolboys of about ten years 
old were asked to volunteer to attend an after-school club at which they 
would be able to carry out various handicrafts such as modelmaking, carv- 
ing, designing toy aeroplanes, and so on. They were divided up into groups, 
some of which were autocratic, some democratic, and some laissez-faire. 
These groups were in charge of adults, who, so to speak, created the 
atmosphere desired. In the democratic groups, the leader gathered the 
children together and discussed with them what should be done. Various 
suggestions were given to the boys, and the leader offered to give them 
any further information they desired, but the final decision was always 


left to them. The boys decided what they would do, worked out a complete 
plan, and arranged which members should work together. The leader 
throughout acted as a member of the group. The autocratic leaders im- 
posed the decisions made in the democratic groups on their own autocratic 
ones, so that both groups were doing the same work, the first from choice 
and by general agreement, the second by orders from above. The autocratic 
leader told the boys what they were to do, revealing only one step of the 
operation at a time, and he assigned boys to work together regardless of 
their own preferences. Apart from directing them, he remained aloof from 
the group and was friendly but impersonal. Unlike the democratic leader, 
he gave no reasons for praise or blame. Finally, the laissez-faire groups 
were allowed to do just as they pleased. The boys were supplied with ma- 
terial for their model-making and were told that they could ask if they 
wished any information. The leader offered no help, did not participate 
unless asked to do so, and neither praised nor blamed anyone. He was, in 
fact, rarely asked for information and still more rarely to participate. 

Thus, while in the democratic groups the leader acted as a catalyst 
which speeded up the natural processes of the group and helped it to attain 
the structure which was the most suitable one in the circumstances, the 
autocratic leader imposed a structure on the group which reflected his own 
wishes rather than those of the members, and the laissez-faire leader was 
not a leader at all. As will be noted, the methods of the autocratic leader 
closely approximated to those generally used in industry: the director de- 
vised the plan without consulting the group; he enforced it on them with- 
out even revealing what the whole plan was; he ordered them what to do 
at each step (you're not paid to think — do what you're damn well told); 
and, finally, he arranged the individuals without regard for what they 
preferred to do or with whom they preferred to work. The results of this 
arrangement were equally typical of what is frequently seen in industrial 
concerns. It was found that autocratic leadership produced two different 
types of behavior within the groups: in some instances there was a marked 
increase of aggressiveness (towards the leader, other members, and even 
inanimate objects), while in other cases the general response was apathy. 

The groups which became aggressive were resentful of their leader be- 
cause he restrained them, but they were also afraid of him and showed 
their resentment by means of indirect forms of aggression. They would 
pretend that they had not heard when they were spoken to, they would 
break rules "by mistake," leave before time was up, and damage materials. 
Once they threatened to go on strike and frequently asked their school- 
teacher to intervene. When the teacher refused to intervene and suggested 
that they go to the leader directly, the proposed strike broke up. A sig- 
nificant feature of these groups was that the boys were not only aggressive 
towards their leader, but were equally aggressive towards other members. 
Group members disparaged each other's work ("Your model is no good, 
mine is much better"), refused to co-operate, and on one occasion the whole 


group picked on a single boy who was treated in such a hostile manner 
that he left the group on a medical excuse ("The doctor says that my eyes 
are so bad that I must play outdoors in the open air instead of coming 
to club meetings"). This boy was clearly a scapegoat, who by the process 
of displacement, was attacked in place of the leader. When at the end of 
a meeting the members were told that they could keep the models they had 
made, many of the boys proceeded to destroy the models on which they 
had been working for many weeks. The apathetic group under an auto- 
cratic leader were just as resentful as the other, and the members during 
interviews disclosed the same dislikes and hatreds. But they did not voice 
them either openly against the leader or displace them against scapegoats 
or other objects. The boys were tense, dull, submissive, and apathetic; they 
did not smile, joke, or play freely together. But when the leader left the 
room, they dropped their work, ran about, shouted, and showed all the 
signs of released tension. The analogy between the behaviour of these 
groups and the behaviour of similar groups in industry is quite striking: 
the negativism, the destructiveness, the scapegoating, the making mistakes 
intentionally, the threat of stoppages and the sabotage, are all typical. 

The laissez-faire groups were chaotic. The members showed a great deal 
of aggressiveness, but without the tension which was manifest in the au- 
thoritarian groups. Practically no work was done, and they were completely 
uncontrolled whether or not the leader was present. 

In contrast, the boys in the democratic groups behaved entirely differ- 
ently. They thought highly of their leader who was described as "a good 
sort who works along with us and thinks about things just as we do"; it was 
said that "he never tried to be boss, but we always had plenty to do." They 
looked forward to the meetings and worked well together, proving more 
constructive than any of the other groups. The work was always described 
as "our models," and they referred to "our" group and what "we" do. The 
work of the more skilful members was looked on with admiration rather 
than jealousy as was the case in the other groups since the skilful workers 
were considered to be a group asset. Criticism of each other's work was 
objective and fair, and when, at the end of the session, they were told that 
they might keep the models they had made, many presented them to their 
leader. When the leader left the room, work went on just as before. The 
actual work was better done. Both in quality and quantity, than that of 
any of the other groups. As a control experiment, the group members were 
changed about; those who had been in an autocratic group being placed 
in a democratic or laissez-faire group and vice versa. But the results proved 
to be quite independent of personalities. Each group produced behaviour 
which was dependent on its structure rather than on who was in it, or 
who was it leader. 

These experiments, which have been repeated many times with the same 
results, seem to show: 


1. The superiority of democratic control (i.e., democratic in the sense used 
here, which is not necessarily related to the behaviour of any of the political 
groups which describe themselves as being 'democratic'). 

2. That, while discipline is always necessary, there is a great deal of difference 
between the self-imposed discipline of^the "we" group and the externally- 
imposed discipline of the autocratic group. 

3. That the analogy between the behaviour of members of an experimental 
autocratic group and the behaviour complained by managements in many 
industrial groups is very close. 

4. That democratic methods of control can be taught to any well-balanced, in- 
telligent individual who does not suffer from any of the defects already men- 
tioned (i.e., low intelligence, self-centered personality, or emotional preju- 

Communication and Control 

One of the distinctive characteristics of man is his ability to create and 
use symbols. Symbols have value as conveyors of meaning from one person 
to another, regardless of the time span involved. This process of conveying 
meaning is called communication. Complex communication symbols and 
systems are essential to human interaction: Only through their use can co- 
operative effort occur; only through their use can the group be directed. 

Nonetheless, mere communication does not insure acceptance of group 
goals and performance standards; nor, apparently, can management rely 
solely upon positive motivation. Evidence indicates that some policing or 
enforcement function is required for optimum attainment of the group's 
objective. Control is the enforcement function associated with the man- 
agerial process. 

A basic determinant of the effectiveness of control is the nature of the 
standard involved, because standards provide the basis of control. New- 
man argues that control involves, essentially, comparison and corrective 
action. Both of these actions require a referent — a standard. In addition, 
he presents various means of corrective actions, e.g., improved motivation. 

Inherent to even informal groups are sanctions and codes of behavior. 
Among other functions, such standards permit evaluation of membership 
behavior and are used ultimately to protect the integrity of the group. If 
such value premises are not established by the formal leaders of the group, 
they will develop informally, by default. Only by chance will informal 
criteria, developed in terms of the expedient and isolated, coincide with 
the dictates of the formal purpose of the group. But the inaccuracies and 
inadequacies created by the absence of formal standards will be no greater 
than those caused by ignorance of them. Thus, factual and value premises 
must be communicated to the members of the organization. However, com- 
munication is highly complex and difficult. Chase discusses some of the 
problems related to the sending terminal of a communication system. 

There is a spontaneous type of communication, the grapevine, which 
cannot be completely formalized. The grapevine arises without regard to 
the formal system of communication and, at times, may subvert it. None- 
theless, Davis suggests that, if recognized and understood, the grapevine 
may not be the ogre generally conceived; and, possibly may be used to 
reinforce the needs of the formal organization. 

As with many other areas in management, the major characteristics and 
forces in communication are subject to quantification. A common term 
applied to this approach is information theory. Shannon and Weaver pre- 
sent certain recent developments of the quantitative aspects of informa- 
tion theory. Although this approach may abstract from some of the im- 



measurable and human aspects of communication, it does lend greater in- 
sight into the major factors involved. 

Not only must information be fed downward but it must also be passed 
upward in the organization. Both corrective action and the revision of 
standards require information pertaining to actual operations and the 
desires of the executor. Tustin discusses feedback as an activity for closing 
up the control process. He demonstrates this aspect of control with ex- 
amples from nature and mechanical devices. Finally, Dimock analyzes the 
role of supervisory management in control and communication. 

Performance Standards and Formal Communication 

Control Relies on Other Phases of Administration 

An executive cannot expect to have good control over his company or 
department unless he also follows sound administrative principles in his 
other duties. A well-conceived program, workable policies and procedures, 
assembly of the necessary resources, training personnel, clear instructions — 
all contribute to achieving the results desired. The better these things are 
done, the easier will be control. 

This dependence of control upon other phases of administration is so 
important that some writers are wary of separating them. For example, 
General Somervell, who has had wide experience in military, government 
and business operations recommends the following steps as means for secur- 
ing control: define objectives, prepare plans and programs, develop suit- 
able organization, establish policies and procedures, require periodic and 
special reports, allocate funds, allocate personnel, train and orient person- 
ned carefully, inspect work in progress, reserve for personal action final 
approval of important undertakings. 1 

In a comprehensive study of administration, however, planning, organiz- 
ing, assembling resources, and directing are themselves major phases. Con- 
sequently, we shall assume here that the preparatory steps have already 
been taken. The administrator has given his instructions and is now con- 
cerned with seeing that they are well executed. 

Even when control is used in this more specific sense, the line between 
it and other phases of administration is not sharp. For example, the de- 
velopment of goals is an essential part of planning, yet many of these same 

* William H. Newman, Administrative Action (New York: Prentice-Hall, Inc., 1951), 
pp. 407-8, 409, 418, 419, 424-27. 

i Organization Controls in Industry, American Management Series, No. 142, 1958, pp. 


goals may be used as standards in the process of control. Also, corrective 
action often includes a refinement or revision of plans. Like all the other 
phases of administration, control is closely interwoven into a complicated 
matrix. For practical analysis it must be treated separately, and yet in 
doing so there is always the risk that someone will forget it is really only 
a part of the total process. 

Steps in Control Process 

The administrator is interested in control of a large diversity of things. 
He wants to be sure that individual and departmental output is of satis- 
factory quality and volume and is completed when needed. He wants to 
keep all sorts of costs in line: payroll, materials, supplies, financial, services, 
and a wide range of intangible costs not directly reflected in the financial 
records. He wants to be sure that resources — people, buildings and equip- 
ment, inventories, accounts receivable, et cetera — are carefully acquired, 
properly protected, and effectively used. If he is responsible for several 
separate activities, the areas needing control are, of course, multiplied. 

It is impractical to discuss here specific controls for such a diversity of 
things. The basic steps in any control situation, however, can be set forth, 
and suggestions made that will be useful in handling a great many individ- 
ual problems. Here again it is the basic or general process of administration 
with which we are primarily concerned. 

There are three essential steps in any control process: 

1. Setting standards at strategic points, 

2. Checking and reporting on performance, 

3. Taking corrective action. 

Setting Standards at Strategic Points 

The setting of standards for use in controlling operations is theoretically 
a simple task. In planning it is necessary to have objectives and goals; these 
are the results it is hoped to achieve. There will be an entire hierarchy of 
such goals in any enterprise. . . . The general objectives of the company are 
broken down into objectives for individual departments and sections. From 
these we develop goals for quality, cost, and output, and supporting these 
figures should be production-time-standards, sales quotas, cash-disburse- 
ments plans, schedules, budgets, and even more specific standards for de- 
tailed operations. 

There can be no argument with the theory that these objectives and goals 
become the standards for purposes of control; operations have been success- 
ful insofar as the goals have been attained. Without this idea of "What is 
the target?" "What are we striving for?" control makes no sense. Once 
planning has established these goals, it might appear that control could 
begin with the process of checking actual results against them. 

In actual operations, however, there are at least two important steps that 


should be taken before attempting to compare actual operations with stand- 
ards. (1) If the control is to have an effective influence on performance, 
the administrator should make sure that the goals are properly identified 
with individual responsibility. (2) Also, the administrator will find it im- 
possible to review all aspects of performance, and consequently must select 
certain points that will give him an adequate indication of what is going 
on with only a limited expenditure of his time. The artful answers to these 
questions lie at the heart of good control systems. 

Tie Control Standards to Individual Responsibility. The control of 
expenses, of governmental relations, of recruitment of high quality sales- 
men, or any other activity becomes potent only when somebody does some- 
thing about it. For example, knowing that telephone expenses are running 
above the budget of last year's figures doesn't do much good as long as the 
item is treated as a general overall expense. As soon as responsibility for 
the increase can be assigned to specific individuals, however, there is a much 
better chance that corrective action will be taken. 

Clear-cut organization will, of course, aid in locating the individual or 
individuals responsible for meeting a specific objective or standard. If 
duties have been clearly defined, it should be a relatively easy matter to 
identify the people who are concerned with the activity that is to be con- 
trolled. The degree of decentralization may be somewhat more difficult to 
discover, and yet this, too, is significant for control purposes. It will be un- 
fair and ineffective, for example, to criticize a branch warehouseman for 
making a lot of long distance telephone calls if his supervisor has instructed 
him to place all requests for additional shipments by phone instead of by 

Checking and Reporting on Performance 

The second basic step in the process of control is to compare actual per- 
formance with the standards and goals already established. . . . 

Most executives keep the control over certain matters in their own 
hands; that is, they insist on checking personally before the work is per- 
mitted to proceed. . . . The executive feels confident that the work is done 
right because he has checked it before it moves on to the next step. 

Under some circumstances the duty of checking and giving prior ap- 
proval may be delegated to men who have special control responsibilities. 
The use of inspectors in a plant who must approve raw material or parts 
before they are used in processing is quite common. Occasionally a con- 
troller or some other man charged with expense control may be empowered 
to authorize exceptions to the budget. Similarly, the personnel officer fre- 
quently checks personnel actions for conformity with standards and poli- 


cies before they become official. Such men are said to have concurrent 
authority. This arrangement is likely to lead to serious difficulty unless 
the basis upon which the control agent withholds approval is clearly de- 

The chief reason for using required confirmation, instead of a subse- 
quent check, is the added assurance that standards will be maintained. On 
the other hand, it is a cumbersome arrangement that may delay action, and 
when concurrent authority is used this may be a source of internal friction. 
For these latter reasons it is wise to use such prior review sparingly. 

Not infrequently what appears to be an insistence on confirmation is 
really a reluctance of the executive to delegate authority because he is un- 
able to clearly state the standards of performance desired. He is not sure 
just what he does want his subordinates to do, and consequently he has 
them move only a step at a time and come back for further directions before 
carrying the project to completion. In other words, some of the planning 
still remains to be done, and the executive feels that it is unwise to turn 
this planning over to subordinates. When working through a new and 
important problem this may be a very practical procedure. For more re- 
petitive or less important problems, however, it suggests an inability to 
plan and a lack of confidence in subordinates. 

Concentrate on Exceptions. A large part of the activities of any enter- 
prise must proceed without waiting for the confirmation of some higher 
executive. Control here is concerned primarily with appraising current and 
completed action as a basis for regulating future activities. 

This appraisal can be simplified by concentrating on unexpected or un- 
usual results. As long as operations take place according to plans and oper- 
ating conditions are as forecast, there is no need for corrective action. It is 
the exceptions — for example, low output, high expense, large sales orders, 
delayed raw materials, jump in labor turnover and the like — that call for 
special attention. 

Consequently, the busy executive often asks for reports on only the ex- 
ceptional matters. He then assumes activities are proceeding normally (as 
planned) unless a report to the contrary is received. 

Such a reporting scheme will work well only if plans are clear to both 
the executive and his subordinates, and if there is a definite understanding 
as to responsibility for reporting exceptions. Rarely is it wise to place com- 
plete reliance on this arrangement; some comprehensive data or personal 
observation should be used to keep tab on results. But there may be a large 
array of standing plans and detailed activities to which this "exception" 
reporting applies. 

Corrective Action 

The first two basic steps of control — setting standards at strategic points 
and checking actual performance against these standards — are really pre- 


liminary. They may be done to perfection and yet no control results unless 
all this checking has some influence on the behavior of people performing 
the actual operation. In other words, the third step, corrective action, is 
necessary before there is any real control. 

Comparison of actual results with the established objectives and stand- 
ards will almost always reveal some places where the results have not come 
up to expectations. As soon as this is discovered it is the duty of the admin- 
istrator to take steps either to correct the past action or, more likely, to 
bring similar action in the future closer to the desired goal. Broadly speak- 
ing this corrective action will be brought about by some combination of the 
following steps: 

1. Adjust physical and external situations, 

2. Review the direction, training and selection of subordinates, 

3. Modify plans where necessary, 

4. Improve motivation. 

Adjust Physical and External Situations. Differences between achieve- 
ment and plans often result from shifts and unexpected obstacles in the 
work situation. The operating plans and goals were, of course, based on 
forecasts covering conditions under which the work would be performed, 
and every executive must spend a significant part of his time working with 
these environmental factors. He will attempt to make the conditions con- 
form to these forecasts, or be even more favorable for achieving the goals. 

The action of an executive to maintain these working conditions takes 
many forms. He tries to see that the work arrives from other departments, 
or perhaps from material suppliers or customers, in the form and at the 
time anticipated. If breakdowns occur in physical equipment — typewriters, 
automobiles, calculating machines, office furniture, processing equipment, 
etc. — he sees that repairs or replacements are made with the least interrup- 
tion to operations. He is concerned with the maintenance of satisfactory 
working conditions; he expedites various supporting activities, such as 
direct-mail advertising for salesmen or ready availability of parts for re- 
pairmen. In a variety of other ways he seeks to create the setting in which 
achievement of goals is unobstructed. 

Review the Direction, Training, and Selection of Subordinates. A sec- 
ond broad area of corrective action is making sure that the individuals 
assigned to the work are properly qualified and directed. All too often 
failure to meet standards can be traced to inadequate direction. Hence the 
executive needs to review again with his subordinates just what is wanted 
and how they should go about accomplishing it. There should be no second 
time for "Oh, I didn't understand." 

The difficulty may run deeper than a misunderstanding of instructions. 
Perhaps the man whose performance needs to be improved lacks the neces- 
sary training and experience for his assignment. The corrective action 
should then consist of providing this training as rapidly as possible, per- 
haps giving the man temporary assistance in the interim. Generally, if the 


man can learn to handle the assignment within a reasonable period of 
time, he should be left on that job. It was management's mistake in assign- 
ing him the work for which he was not yet prepared and in the interests 
of good morale the man should be given an opportunity to show what he 
can do when properly trained. 

Nevertheless, there will be occasions when experience shows that a man 
lacks some of the basic abilities needed to perform a job, or when it is im- 
practical to keep the man in a position while he is growing up to it. A 
transfer of the man to work for which he is qualified and his replacement 
by a more capable individual is the positive action required, provided such 
transfers can be made without serious disruption in morale. 

Modify Plans where Necessary. Corrective action usually includes at 
least some revision of plans. Many external forces cannot be adjusted by 
executive action, notably sales orders, competitive prices, availability of 
labor and materials, and similar factors influenced by general business con- 
ditions. Consequently, there is need for continuing appraisal of results in 
terms of these changing conditions, and adjusting plans accordingly. 

Similarly, breakdowns or other interruptions to operations may call for 
a revision of schedule and perhaps different methods and reassignment of 
the work. When it is discovered that a particular individual is not able to 
carry out his assignment, the lack of a satisfactory substitute or the up- 
setting effect of his transfer may make an adjustment in the work assigned 
to him more practical than a transfer to a different position. 

Moreover, a careful review of operating experience may suggest ways 
that standing plans may be improved. Standards may be too high, policies 
need qualification so as to avoid frequent exceptions, or methods should 
be adjusted to make better use of existing facilities and personnel. If oper- 
ating results are much better than the established standards, perhaps the 
reasons for the achievement can be discovered and introduced as a standard 
practice. For special projects and other nonrecurring activity, experience 
may show which mistakes to avoid and which measures proved to be par- 
ticularly effective. These should be noted as guides to planning of similar 
projects in the future. 

Such revision of plans is an essential part of corrective action. At the 
same time it starts anew the administrative cycle of planning, direction, 
and control. The revised plans must be communicated to those who are 
responsible for executing them, and provision made for checking actual 
performance. Any dynamic enterprise should anticipate that control will 
bring with it revision and adaptation to meet changing conditions. 

Improve Motivation. Along with creating the proper work situation, 
making sure subordinates are adequately prepared and instructed, and re- 
vising plans where necessary, there is a fourth major phase of corrective 
action — the improvement of motivation. Operating achievements may not 
have come up to standard, at least partly because the people doing the work 
didn't put forth enough effort. A desire to work with others is furthering 


the purposes of the enterprise is necessary if any work is to be done, and 
this matter of willingness to strive is particularly important when improve- 
ments in results are sought. 


The modern executive lives in an increasingly complicated network of 
communication, with lines leading up, down, and sideways from his desk. 
He has to keep lines clear, not only to those below in the business hierarchy, 
but to whatever levels may be above. Some years ago, a New Jersey com- 
pany called in a consultant to set up a so-called "vertical round table" — a 
discussion group designed to keep lines open between seven levels of man- 
agement, from top drawer to assistant supervisor. (The experiment intro- 
duced them to each other for the first time, and worked out most help- 

Important communication lines run outside the company, too, of course, 
to dealers, suppliers, consumers, government officials, and the general pub- 
lic — whose good will is so essential today. 

Many excellent studies on the problems of communication have already 
been published. But there is a close relationship between communication 
and the lively young science of semantics, and executives interested in im- 
proving communication can take advantage of this new tool. 

Semantics has been defined as "the systematic study of meaning." It deals 
mostly with words, but may include other methods of signaling, such as 
gestures, facial expressions, signs, and symbols. UNESCO has been working 
on a system of highway symbols (curves, side roads, danger, etc.) which 
can be understood in any part of the world, irrespective of the language 

Semantics goes far beyond dictionary definitions. It attempts to evaluate 
what a speaker really means, as contrasted with what he says. To call a man 
a "horse-thief," in literal dictionary terms, is to accuse him of a serious 
crime. But when Jones greets Robinson with "Hullo, you old horse-thief!" 
his intentions may be nothing but affection. 

The goal of semantics is a better understanding inside our heads of what 
goes on outside them, and consequently a better adjustment to our en- 
vironment. It can help us to clarify meanings in much the same way as a 
good pair of glasses can clarify a landscape to one suffering from astig- 

From the outside world come signals and messages in the form of light 
waves, sound waves, shock waves, pressures. They follow nerve currents 

* Stuart Chase, "Executive Communications: Breaking the Semantic Barrier," Man- 
agement Review, Vol. XLVI, No. 4 (April, 1957), pp. 58-66. 


from eye, ear, fingertips, to the brain. What do they mean? If we interpret 
them incorrectly, we are in trouble. The sight of an oncoming car crossing 
into our lane can, in a sense, become a problem in semantics. So can the 
task of unscrambling such terms as "fair price," "reasonable profit," and 
"security risk." Insurance men, I understand, are having as much trouble 
defining "explosion" as the United Nations is having with "aggression." 

The present author tried to bring the whole subject of semantics to a 
wider audience in 1938 with his book, The Tyranny of Words. Since then, 
there have been many books, monographs, lectures, and seminars devoted 
to semantics, and more than 100 colleges now give courses in the subject. 1 

Semantics takes its place beside a dozen other disciplines concerned with 
communication, ranging from the rigorous mathematical theory of Claude 
Shannon of the Bell Laboratories to studies in how to listen. Automation 
is the child of cybernetics, and cybernetics, developed by Dr. Norbert 
Weiner of M.I.T., is a branch of communication theory. 

When I investigated the excellent communication system at Pitney- 
Bowes, Inc. 2 I was doing a little semantic research to determine how the 
rank and file got their suggestions, grievances, and stories up to top man- 
agement and how management got its stories down. There were at least 
five upward channels, and more than that downward. 

One particularly interesting channel at Pitney-Bowes is the annual "J OD " 
holders Meeting," which follows the stockholders meeting and takes a 
similar form. (The semanticist is shy of the word "same," since no two 
events are ever precisely the same.) Workers hear the president, treasurer, 
and other officers give an account of what has happened in the past fiscal 
year and predict the fortunes of the company for the new year. Questions 
are in order from the floor, and plenty come. "I see here on the balance 
sheet that all our patents are only worth one dollar. That doesn't seem 
right," says a machinist. This one gives the treasurer some minutes of acute 
mental activity! 


Perhaps the major principle of semantics is to stop, look, and listen when 
a message comes in to be decoded by the brain and not let it trigger off an 
emotional response. If there is time, consider what this particular message 
means coming from this particular source. 

1 Semantics was introduced into the language by Lady Viola Welby in a book called 
What is Meaning? published in 1903. In 1921, Ogden and Richards brought out their 
devasting Meaning of Meaning, which, among other things, turned the great philosophers 
from Aristotle to Hegel upside down, and shook them vigorously for verbal content. 
Alfred Korzybski, a Polish-American mathematician, published Science and Sanity in 
1933, introducing what he called "General Semantics" — a discipline which emphasized 
psychological aspects of meaning. 

2 See "Communications Up, Down, and Sideways," Readers Digest, September, 1952. 


Equally important is the proper sending of messages. Will your words 
correspond well enough to the past experience of the hearer so that he can 
understand what you say? To use the terminology of Claude Shannon, will 
he decode what you encode? Without common experience the memories 
of both speaker and hearer, the communication line is dead. "Foreigners" 
are not ignorant, they've just had different experiences. "Workers" ("or 
bosses") are not necessarily stupid; they, too, have had different experi- 
ences. If an Indian from the Amazon has never seen or felt snow, it is useless 
to talk to him about skiing. 

How does one identify roadblocks on the communication line? Out of 
more than a dozen which have been classified, here are the six most com- 

1. The Confusion of Words with Things 

Words are so cardinal in human affairs that we tend to assume that 
behind every word must stand a physical thing to which the word refers. 
Take the term "unemployment." It sounds pretty specific, but to the stu- 
dent of semantics, it is exceedingly indefinite. He might make a list of 
various kinds of unemployment, using an index notion like this: 

Unemployment is where a man has lost his job and is looking hard for another 

Unemployment is where a man has lost his job but is not looking for another 

one. His wife can balance the budget. 
Unemployment is where a man needs a job, is looking for a job, but is physically 

incapable of doing a job (unemployable). 
Unemployment is where a man is laid off for a month while the model is changed 

to the biggest, longest, most beautiful number the world has ever seen! 
Unemployment is where a man is working part time and is looking for another 

part-time job to pay the grocer. 

No wonder honest statisticians, trying to figure the exact number of "un- 
employed" on a given day, are driven to distraction! 

The executive with a little semantic training never forgets that Words 
are not things. "Unemployment" is a word in our heads, with no precise 
referent out there in the world of space and time. It can be applied to a 
whole spectrum of referents. 

The Empire State Building, on the other hand, is more manageable. We 
can point to it, see the clouds form around the TV mast, go up and kick 
its solid cornerstone, and agree on a physical thing to which the term "Em- 
pire State Building" refers. When we discuss the "architectural beauty" 
of the building, however, agreement may vanish and hassle develop. Why? 
Because "architectural beauty" is a term in our heads, for which everyone 
has a somewhat different meaning. 

2. The Careless Use of Abstract Words 

This roadblock is close to the one above. An abstract term should not 
be used carelessly. Everyone interested in international affairs today is 


talking about "aggression." The British committed "aggression" in Egypt, 
the Russians committed "aggression" in Hungary, the Chinese committed 
"aggression" in Korea. A committee of the United Nations, however, after 
two years' intensive study, has been unable to define the term. The com- 
mittee is in despair, but no semanticist is surprised. "Aggression" is an 
abstraction of a high order with severely limited usefulness. It has many 
meanings, on various levels. In international politics it has a "bad" mean- 
ing, but aggressiveness in business is quite different. We think well of an 
aggressive salesman, and we say a good executive should be alert and ag- 
gressive. But we don't like it when an executive displays "aggression" to- 
wards his associates. 

Also up in the stratosphere are two formidable abstractions glowering 
at each other — "capital" and "labor." As all cartoonists know, one wears 
a plug hat, the other a kind of square cap popular with stone masons in 
the 1840's. These high abstractions can never come to terms; their combat 
is supposed to be eternal, and is formalized in the "class struggle" of Karl 
Marx. But the semanticist goes down the abstraction ladder to the real 
world. There he finds Company X in constant hot water with the unions, 
and Company Y not only living at peace with them, but using union shop 
discipline to produce better dividends. He also finds that "capital" is an 
increasingly muzzy term, now that the legal owners of most large corpora- 
tions leave control to self-perpetuating managers who may own very little 
stock. This semantic exercise, incidentally, again demolishes the class strug- 
gle concept of Marx, which assumed a monolithic, unchanging "capital- 

Abstract terms are necessary — indeed, we could not think without them 
— but we should be aware of their limitations, aware of the level they are 
on. When a politician sounds off about "liberty" — just liberty — the seman- 
ticist remembers the saying, "Your liberty to swing your arms ends where 
my nose begins." "Liberty" means little until we bring it down and ask: 
liberty to do what? Has a business man, for example, unlimited "liberty" 
to cut prices, or to enter into agreements in restraint of trade? 

3. The Confusion of Facts with Personal Opinions 

We meet this roadblock on every mental highway. Children should be 
warned about it at the age of ten, but seldom are. In Madison, Wisconsin, 
reporters for the Capital Times took a sidewalk poll, asking some 300 
citizens: "What is a Communist?" A farmer in from the country gave a 
typical reply: "They're no good in my opinion. I don't know what they 
are." Observe that he had no facts, could draw no inferences, but did not 
hesitate to jump to the opinion level and deliver a moral judgment! 

The correct way to get at the truth of an event is precisely the reverse. 
First gather the relevant facts, then draw logical deductions from them. 
Finally, if the occasion warrants, deliver your personal opinions. 

When two men from the Department of Justice arrived one day at Pitney- 


Bowes, rumors might well have gone racing through the plant: "They're 
going to close us up!" Management, anticipating such rumors, immediately 
posted this notice on every bulletin board: 

All employees should assist the bureau's representatives in every way . . . such 
investigations by the Department of Justice have become almost routine through- 
out American industry. They represent a necessary policing of our economic 

Thus management substituted a true meaning for a wild one. Rumors, 
which may be as dangerous to a business firm as fire and go even faster, are 
often dizzy leaps to the opinion level. They can usually be extinguished by 
a flood of plain facts. The alert executive will get his facts on the notice 
board before the event, if he knows it is coming. 

4. Judging People and Events in Terms of Black or White 

Sometimes this roadblock is called "either-or thinking," sometimes "two- 
valued thinking." Many situations are indeed black or white, without 
shades of gray. A man is alive or he is dead, for example. But the vast ma- 
jority of our big social, political, and economic problems are many-sided, 
not just two-sided. 

The either-or thinker says, "Those who are not with us are against us," 
and consigns India to the Communist camp. The semanticist recoils at such 
a conclusion. It is bad enough, he thinks, to cope with Russia and Red 
China without taking on the half-billion inhabitants of the "neutral" 

If an employer takes the position that unions are bad, period, he is in- 
viting unnecessary trouble in the world of today. If, however, he takes the 
position that some unions are badly led, or some union members are bad 
actors, he will find life easier, for he is coming closer to the actual situation. 

The bell-shaped frequency distribution curve is a useful offset to rigid 
two-valued thinking. If all the men in a given society are measured for 
height, and the figures charted, the curve will show a few seven-footers at 
one end, a few five-footers at the other end, and most of us in the middle. 
The case is similar for union members (or for employers) — the saints at one 
end, the so-and-so's at the other, and most of us in the middle. The curve 
represents the semantic multi-valued view, as against the two-valued view. 

5. False Identity Based on Words 

This roadblock was the cause of great confusion in the days of Senator 
McCarthy. Anyone who disagreed with him risked being labeled a Com- 
munist, on the syllogism: 

Communists are against McCarthy. 
Spifkins is against McCarthy. 
Therefore, Spifkins is a Communist. 

"Things equal to the same thing are equal to each other" may be true of 
the words in a syllogism, but not necessarily of the actual situation. False 


identity can also be established by the old saying, "The enemy of my enemy 
is my friend." Similar reasoning would put the U.S. in the predicament of 
being Russia's friend when both censured the British for the invasion of 

Guilt by verbal association can also be shown in the classic case of the 
late Senator Taft. When he introduced his bill for public housing in 1947, 
he was attacked by certain real estate interests whose arguments boiled 
down to this syllogism: 

Communists favor public housing. 

Senator Taft has sponsored a bill for public housing. 

Therefore, Senator Taft is following the Moscow line. 

Following the same type of reasoning, a student of semantics could pre- 
pare another syllogism: 

Communists favor apple pie. 
Senator Taft favors apple pie. 
Therefore . . . etc. 

The trick is to find one characteristic, just one, shared by your victim and 
a common enemy, and then leap to the conclusion that all their character- 
istics are identical. Since all of us have literally thousands of characteristics 
— sex, weight, height, eye color, race, religion, occupation, aptitudes, atti- 
tudes, beliefs — it is child's play to find one shared by any two persons, or 
by a person and an organization. With this common bond established, guilt 
(or innocence) can be "proved," at least well enough to make the headlines. 
Indeed, with this monstrous logic it is possible to prove anybody guilty of 

6. Gobbledegook 

The last semantic roadblock we shall investigate is the clouding of mean- 
ing by fancy words. On the campus it is known as "pedageese" — the peda- 
geese of the pedagogues, a variety of protective coloration. The term "gob- 
bledegook" was invented by the late Maury Maverick, Congressman from 
Texas, to describe the language of paperwork in big government offices. 
Any big office is likely to come down with a severe attack. 

A member of Parliament, A. P. Herbert, exasperated with bureaucratic 
jargon, once translated Nelson's immortal phrase, "England expects every 
man to do his duty," into standard big-office prose: 

England anticipates that, as regards the current emergency, personnel will face 
up the issues and exercise appropriately the functions allocated to their respective 
occupational groups. 

An American office manager sent this memo to his chief: 

Verbal contact with Mr. Blank regarding the attached notification of promotion 
has elicited the attached representation intimating that he prefers to decline the 


Translation: Mr. Blank doesn't want the job. 

On reaching the top of the Finsteraahorn in 1845, M. Dolfuss-Ausset, 
when he got his breath, exclaimed: "The soul communes with the infinite 
in those icy peaks which seem to have their roots in the bowels of eternity." 

Translation: He likes the view. 

A Washington department announced: 

Voucherable expenditures necessary to provide adequate dental treatment re- 
quired as adjunct to medical treatment being rendered a pay patient on in-patient 
status may be incurred as required at the expense of the Public Health Service. 

Translation: You can charge your dentist bill to the Public Health 
Service. Or can you? 

To be fair to Washington, I should point out that the Federal Security 
Agency in 1950 made an intensive study of interoffice gobbledegook and 
issued an excellent report thereon, a report which every executive in busi- 
ness as well as government might well have on his desk. 3 It is not only in- 
structive, but funny. For example: 

The problem of extending coverage to all employees, regardless of size, is not 
as simple as surface appearances indicate. . . . 

Though the proportions of all males and females in ages 16—45 are essentially 
the same. . . . 

Dairy cattle, usually and commonly embraced in dairying . . . 

These solemn statements, and many others found in the paperwork, en- 
livened the investigation. 


Semantics is no "monopoly" of heavy thinkers. It is for anyone to use 
who needs to keep his communication lines clear — and what business man 
does not? It is common sense combined with a systematic study of how 
words behave at various levels and how meanings can be better sent and 

Beardsley Ruml has observed: "Reasonable men always agree if they 
understand what they are talking about." "Always" may be a little strong, 
but we can safely settle for 95 per cent. 

3 Hall and Grady, "Getting Your Ideas Across through Writing," Training Manual 
No. 7, 44 pages. 


Mathematics of Communication and 
Concepts of Feedback 



1.1. Communication 

The word communication will be used here in a very broad sense to 
include all of the procedures by which one mind may affect another. This, 
of course, involves not only written and oral speech, but also music, the 
pictorial arts, the theatre, the ballet, and in fact all human behavior. In 
some connections it may be desirable to use a still broader definition of 
communication, namely, one which would include the procedures by means 
of which one mechanism (say automatic equipment to track an airplane 
and to compute its probable future positions) affects another mechanism 
(say a guided missile chasing this airplane). 

The language of this memorandum will often appear to refer to the spe- 
cial, but still very broad and important, field of the communication of 

* Claude E. Shannon and Warren Weaver, The Mathematical Theory of Communi- 
cation (Urbana, 111.: University of Illinois Press, 1949), pp. 95-113. 

i This paper is written in three main sections. In the first and third, Warren Weaver 
is responsible both for the ideas and the form. The middle section, namely "2), Com- 
munication Problems of Level A" is an interpretation of mathematical papers by Dr. 
Claude E. Shannon of the Bell Telephone Laboratories. Dr. Shannon's work roots back, 
as von Neumann has pointed out, to Boltzmann's observation, in some of his work on 
statistical physics (1894), that entropy is related to "missing information," inasmuch as 
it is related to the number of alternatives which remain possible to a physical system 
after all the macroscopically observable information concerning it has been recorded. 
L. Szilard (Zsch. f. Phys. Vol. LIII, 1925) extended this idea to a general discussion of 
information in physics, and von Neumann (Math Foundation of Quantum Mechanics, 
Berlin: 1932, chap. 5) treated information in quantum mechanics and particle physics. 
Dr. Shannon's work connects more directly with certain ideas developed some twenty 
years ago by H. Nyquist and R. V. L. Hartley, both of the Bell Laboratories; and Dr. 
Shannon has himself emphasized that communication theory owes a great debt to Pro- 
fessor Norbert Wiener for much of its basic philosophy. Professor Wiener, on the other 
hand, points out that Shannon's early work on switching and mathematical logic ante- 
dated his own interest in this field; and generously adds that Shannon certainly de- 
serves credit for independent development of such fundamental aspects of the theory 
as the introduction of entropic ideas. Shannon has naturally been specially concerned 
to push the applications to engineering communication, while Wiener has been more 
concerned with biological application (central nervous system phenomena, etc.). 


speech; but practically everything said applies equally well to music of 
any sort, and to still or moving pictures, as in television. 

1.2. Three Levels of Communications Problems 

Relative to the broad subject of communication, there seem to be prob- 
lems at three levels. Thus it seems reasonable to ask, serially: 

Level A. How accurately can the symbols of communication be transmitted? (The 

technical problem.) 
Level B. How precisely do the transmitted symbols convey the desired meaning? 

(The semantic problem.) 
Level C. How effectively does the received meaning affect conduct in the desired 

way? (The effectiveness problem.) 

The technical problems are concerned with the accuracy of transference 
from sender to receiver of sets of symbols (written speech), or of a continu- 
ously varying signal (telephonic or radio transmission of voice or music), or 
of a continuously varying two-dimensional pattern (television), etc. Mathe- 
matically, the first involves transmission of a finite set of discrete symbols, 
the second the transmission of one continuous function of time, and the 
third the transmission of many continuous functions of time or of one con- 
tinuous function of time and of two space coordinates. 

The semantic problems are concerned with the identity, or satisfactorily 
close approximation, in the interpretation of meaning by the receiver, as 
compared with the intended meaning of the sender. This is a very deep and 
involved situation, even when one deals only with the relatively simpler 
problems of communicating through speech. 

One essential complication is illustrated by the remark that if Mr. X is 
suspected not to understand what Mr. Y says, then it is theoretically not 
possible, by having Mr. Y do nothing but talk further with Mr. X, com- 
pletely to clarify this situation in any finite time. If Mr. Y says "Do you 
now understand me?" and Mr. X says "Certainly, I do," this is not neces- 
sarily a certification that understanding has been achieved. It may just be 
that Mr. X did not understand the question. If this sounds silly, try it 
again as "Czy pan mnie rozumie?" with the answer "Hai wakkate imasu." 
I think that this basic difficulty 2 is, at least in the restricted field of speech 
communication, reduced to a tolerable size (but never completely elimi- 
nated) by "explanations" which (a) are presumably never more than ap- 
proximations to the ideas being explained, but which (b) are understand- 

2 "When Pfungst (1911) demonstrated that the horses of Elberfeld, who were showing 
marvelous linguistic and mathematical ability, were merely reacting to movements of 
the trainer's head, Mr. Krall (1911), their owner, met the criticism in the most direct 
manner. He asked the horses whether they could see such small movements and in answer 
they spelled out an emphatic 'No.' Unfortunately we cannot all be so sure that our 
questions are understood or obtain such clear answers." See K. S. Lashley, "Persistent 
Problems in the Evolution of Mind" in, Quarterly Review of Biology, Vol. XXIV 
(March, 1949), p. 28. 


able since they are phrased in language which has previously been made 
reasonably clear by operational means. For example, it does not take long 
to make the symbol for "yes" in any language operationally understand- 

The semantic problem has wide ramifications if one thinks of communi- 
cation in general. Consider, for example, the meaning to a Russian of a 
U.S. newsreel picture. 

The effectiveness problems are concerned with the success with which 
the meaning conveyed to the receiver leads to the desired conduct on his 
part. It may seem at first glance undesirably narrow to imply that the pur 
pose of all communication is to influence the conduct of the receiver. But 
with any reasonably broad definition of conduct, it is clear that communi- 
cation either affects conduct or is without any discernible and probable 
effect at all. 

The problem of effectiveness involves aesthetic consideration in the case 
of the fine arts. In the case of speech, written or oral, it involves considera- 
tions which range all the way from the mere mechanics of style, through 
all the psychological and emotional aspects of propaganda theory, to those 
value judgments which are necessary to give useful meaning to the words 
"success" and "desired" in the opening sentence of this section on effective- 

The effectiveness problem is closely interrelated with the semantic prob- 
lem, and overlaps it in a rather vague way; and there is in fact overlap 
between all of the suggested categories of problems. 


So stated, one would be inclined to think that Level A is a relatively 
superficial one, involving only the engineering details of good design of a 
communication system; while B and C seem to contain most if not all of 
the philosophical content of the general problem of communication. 

The mathematical theory of the engineering aspects of communication, 
as developed chiefly by Claude Shannon at the Bell Telephone Labora- 
tories, admittedly applies in the first instance only to problem A, namely, 
the technical problem of accuracy of transference of various types of signals 
from sender to receiver. But the theory has, I think, a deep significance 
which proves that the preceding paragraph is seriously inaccurate. Part of 
the significance of the new theory comes from the fact that levels B and C, 
above, can make use only of those signal accuracies which turn out to be 
possible when analyzed at Level A. Thus any limitations discovered in the 
theory at Level A necessarily apply to levels B and C. But a larger part 
of the significance comes from the fact that the analysis at Level A dis- 
closes that this level overlaps the other levels more than one could possibly 
naively suspect. Thus the theory of Level A is, at least to a significant de- 
gree, also a theory of levels B and C. I hope that the succeeding parts of 
this memorandum will illuminate and justify these last remarks. 




2.1. A Communication System and Its Problems 

The communication system considered may be symbolically represented 
as follows: 













The information source selects a desired message out of a set of possible 
messages (this is a particularly important remark, which requires consider- 
able explanation later). The selected message may consist of written or 
spoken words, or of pictures, music, etc. 

The transmitter changes this message into the signal which is actually 
sent over the communication channel from the transmitter to the receiver. 
In the case of telephony, the channel is a wire, the signal a varying electrical 
current on this wire; the transmitter is the set of devices (telephone trans- 
mitter, etc.) which change the sound pressure of the voice into the varying 
electrical current. In telegraphy, the transmitter codes written words into 
sequences of interrupted currents of varying lengths (dots, dashes, spaces). 
In oral speech, the information source is the brain, the transmitter is the 
voice mechanism producing the varying sound pressure (the signal) which 
is transmitted through the air (the channel). In radio, the channel is simply 
space (or the aether, if any one still prefers that antiquated and misleading 
word), and the signal is the electromagnetic wave which is transmitted. 

The receiver is a sort of inverse transmitter, changing the transmitted 
signal back into a message, and handing this message on to the destination. 
When I talk to you, my brain is the information source, yours the destina- 
tion; my vocal system is the transmitter, and your ear and the associated 
eighth nerve is the receiver. 

In the process of being transmitted, it is unfortunately characteristic 
that certain things are added to the signal which were not intended by the 
information source. These unwanted additions may be distortions of sound 
(in telephony, for example) or static (in radio), or distortions in shape or 
shading of picture (television), or errors in transmission (telegraphy or 
facsimile), etc. All of these changes in the transmitted signal are called 


The kind of questions which one seeks to ask concerning such a com- 
munication system are: 

a) How does one measure amount of information? 

b) How does one measure the capacity of a communication channel? 

c) The action of the transmitter in changing the message into the signal often 
involves a coding process. What are the characteristics of an efficient coding 
process? And when the coding is as efficient as possible, at what rate can the 
channel convey information? 

d) What are the general characteristics of noise? How does noise affect the ac- 
curacy of the message finally received at the destination? How can one mini- 
mize the undesirable effects of noise, and to what extent can they be elimi- 

e) If the signal being transmitted is continuous (as in oral speech or music) 
rather than being formed of discrete symbols (as in written speech, telegraphy, 
etc.), how does this fact affect the problem? 

We will now state, without proofs and with a minimum of mathematical 
terminology, the main results which Shannon has obtained. 

2.2. Information 

The word information, in this theory, is used in a special sense that must 
not be confused with its ordinary usage. In particular, information must 
not be confused with meaning. 

In fact, two messages, one of which is heavily loaded with meaning and 
the other of which is pure nonsense, can be exactly equivalent, from the 
present viewpoint, as regards information. It is this, undoubtedly, that 
Shannon means when he says that "the semantic aspects of communication 
are irrelevant to the engineering aspects." But this does not mean that the 
engineering aspects are necessarily irrelevant to the semantic aspects. 

To be sure, this word information in communication theory relates not 
so much to what you do say, as to what you could say. That is, information 
is a measure of one's freedom of choice when one selects a message. If one 
is confronted with a very elementary situation where he has to choose one 
of two alternative messages, then it is arbitrarily said that the information, 
associated with this situation, is unity. Note that it is misleading (although 
often convenient) to say that one or the other message conveys unit infor- 
mation. The concept of information applies not to the individual messages 
(as the concept of meaning would), but rather to the situation as a whole, 
the unit information indicating that in this situation one has an amount 
of freedom of choice, in selecting a message, which it is convenient to regard 
as a standard or unit amount. 

The two messages between which one must choose, in such a selection, 
can be anything one likes. One might be the text of the King James Version 
of the Bible, and the other might be "Yes." The transmitter might code 
these two messages so that "zero" is the signal for the first, and "one" the 
signal for the second; or so that a closed circuit (current flowing) is the sig- 
nal for the first, and an open circuit (no current flowing) the signal for the 


second. Thus the two positions, closed and open, of a simple relay, might 
correspond to the two messages. 

To be somewhat more definite, the amount of information is defined, 
in the simplest cases, to be measured by the logarithm of the number of 
available choices. It being convenient to use logarithms 3 to the base 2, 
rather than common or Briggs' logarithm to the base 10, the information, 
when there are only two choices, is proportional to the logarithm of 2 to 
the base 2. But this is unity; so that a two-choice situation is characterized 
by information of unity, as has already been stated above. This unit of 
information is called a "bit," this word, first suggested by John W. Tukey, 
being a condensation of "binary digit." When numbers are expressed in 
the binary system there are only two digits, namely and 1; just as ten 
digits, to 9 inclusive, are used in the decimal number system which em- 
ploys 10 as a base. Zero and one may be taken symbolically to represent 
any two choices, as noted above; so that "binary digit" or "bit" is natural 
to associate with the two-choice situation which has unit information. 

If one has available, say 16 alternative messages among which he is equal- 
ly free to choose, then since 16 = 2 4 so that log 2 16 = 4, one says that this 
situation is characterized by 4 bits of information. 

It doubtless seems queer, when one first meets it, that information is de- 
fined as the logarithm of the number of choices. But in the unfolding of 
the theory, it becomes more and more obvious that logarithmic measures 
are in fact the natural ones. At the moment, only one indication of this 
will be given. It was mentioned above that one simple on-or-off relay, with 
its two positions labeled, say, and 1 respectively, can handle a unit in- 
formation situation, in which there are but two message choices. If one 
relay can handle unit information, how much can be handled by say three 
relays? It seems very reasonable to want to say that three relays could han- 
dle three times as much information as one. And this indeed is the way it 
works out if one uses the logarithmic definition of information. For three 
relays are capable of responding to 2 3 or 8 choices, which symbolically 
might be written as 000, 001, 011, 010, 100, 110, 101, 111, in the first of 
which all three relays are open, and in the last of which all three relays 
are closed. And the logarithm to the base 2 of 2 3 is 3, so that the logarithmic 
measure assigns three units of information to this situation, just as one 
would wish. Similarly, doubling the available time squares the number of 
possible messages, and doubles the logarithm; and hence doubles the in- 
formation if it is measured logarithmically. 

The remarks thus far relate to artificially simple situations where the 
information source is free to choose only between several definite messages 
— like a man picking out one of a set of standard birthday greeting tele- 
grams. A more natural and more important situation is that in which the 
information source makes a sequence of choices from some set of elemen- 

3 When m# — y, then x is said to be the logarithm of y to the base m. 


tary symbols, the selected sequence then forming the message. Thus a man 
may pick out one word after another, these individually selected words then 
adding up to form the message. 

At this point an important consideration which has been in the back- 
ground, so far, comes to the front for major attention. Namely, the role 
which probability plays in the generation of the message. For as the suc- 
cessive symbols are chosen, these choices are, at least from the point of 
view of the communication system, governed by probabilities; and in fact 
by probabilities which are not independent, but which, at any stage of the 
process, depend upon the preceding choices. Thus, if we are concerned 
with English speech, and if the last symbol chosen is "the," then the prob- 
ability that the next word be an article, or a verb form other than a verbal, 
is very small. This probabilistic influence stretches over more than two 
words, in fact. After the three words "in the event" the probability for 
"that" as the next word is fairly high, and for "elephant" as the next word 
is very low. 

That there are probabilities which exert a certain degree of control over 
the English language also becomes obvious if one thinks, for example, of 
the fact that in our language the dictionary contains no words whatsoever 
in which the initial letter j is followed by b, c, d, f, g, j, k, 1, q, r, t, v, w, 
x, or z; so that the probability is actually zero that an initial j be followed 
by any of these letters. Similarly, anyone would agree that the probability 
is low for such a sequence of words as "Constantinople fishing nasty pink." 
Incidentally, it is low, but not zero; for it is perfectly possible to think of 
a passage in which one sentence closes with "Constantinople fishing," and 
the next begins with "Nasty pink." And we might observe in passing that 
the unlikely four-word sequence under discussion has occurred in a single 
good English sentence, namely the one above. 

A system which produces a sequence of symbols (which may, of course, 
be letters or musical notes, say, rather than words) according to certain 
probabilities is called a stochastic process, and the special case of a sto- 
chastic process in which the probabilities depend on the previous events, 
is called a Markoff process or a Markoff chain. Of the Markoff processes 
which might conceivably generate messages, there is a special class which 
is of primary importance for communication theory, these being what are 
called ergodic processes. The analytical details here are complicated and 
the reasoning so deep and involved that it has taken some of the best efforts 
of the best mathematicians to create the associated theory; but the rough 
nature of an ergodic process is easy to understand. It is one which produces 
a sequence of symbols which would be a poll-taker's dream, because any 
reasonably large sample tends to be representative of the sequence as a 
whole. Suppose that two persons choose samples in different ways, and 
study what trends their statistical properties would show as the samples 
become larger. If the situation is ergodic, then those two persons, however 
they may have chosen their samples, agree in their estimates of the prop- 


erties of the whole. Ergodic systems, in other words, exhibit a particularly 
safe and comforting sort of statistical regularity. 

Now let us return to the idea of information. When we have an informa- 
tion source which is producing a message by successively selecting discrete 
symbols (letters, words, musical notes, spots of a certain size, etc.), the prob- 
ability of choice of the various symbols at one stage of the process being 
dependent on the previous choices (i.e., a M arkoff process), what about the 
information associated with this procedure? 

The quantity which uniquely meets the natural requirements that one 
sets up for "information" turns out to be exactly that which is known in 
thermodynamics as entropy. It is expressed in terms of the various prob- 
abilities involved — those of getting to certain stages in the process of form- 
ing messages, and the probabilities that, when in those stages, certain 
symbols be chosen next. The formula, moreover, involves the logarithm 
of probabilities, so that it is a natural generalization of the logarithmic 
measure spoken of above in connection with simple cases. 

To those who have studied the physical sciences, it is most significant 
that an entropy-like expression appears in the theory as a measure of in- 
formation. Introduced by Clausius nearly one hundred years ago, closely 
associated with name of Boltzmann, and given deep meaning by Gibbs in 
his classic work on statistical mechanics, entropy has become so basic and 
pervasive a concept that Eddington remarks "The law that entropy always 
increases — the second law of thermodynamics — holds, I think, the supreme 
position among the laws of Nature." 

In the physical sciences, the entropy associated with a situation is a meas- 
ure of the degree of randomness, or of "shuffled-ness" if you will, in the 
situation; and the tendency of physical systems to become less and less 
organized, to become more and more perfectly shuffled, is so basic that 
Eddington argues that it is primarily this tendency which gives time its 
arrow — which would reveal to us, for example, whether a movie of the 
physical world is being run forward or backward. 

Thus when one meets the concept of entropy in communication theory, 
he has a right to be rather excited — a right to suspect that one has hold of 
something that may turn out to be basic and important. That information 
be measured by entropy is, after all, natural when we remember that in- 
formation, in communication theory, is associated with the amount of 
freedom of choice we have in constructing messages. Thus for a communi- 
cation source one can say, just as he would also say it of a thermodynamic 
ensemble, "This situation is highly organized, it is not characterized by a 
large degree of randomness or of choice — that is to say, the information (or 
the entropy) is low." We will return to this point later, for unless I am 
quite mistaken, it is an important aspect of the more general significance of 
this theory. 

Having calculated the entropy (or the information, or the freedom of 
choice) of a certain information source, one can compare this to the maxi- 


mum value this entropy could have, subject only to the condition that the 
source continue to employ the same symbols. The ratio of the actual to 
the maximum entropy is called the relative entropy of the source. If the 
relative entropy of a certain source is, say .8, this roughly means that this 
source is, in its choice of symbols to form a message, about 80 per cent as 
free as it could possibly be with these same symbols. One minus the relative 
entropy is called the redundancy. This is the fraction of the structure of 
the message which is determined not by the free choice of the sender, but 
rather by the accepted statistical rules governing the use of the symbols in 
question. It is sensibly called redundancy, for this fraction of the message 
is in fact redundant in something close to the ordinary sense; that is to say, 
this fraction of the message is unnecessary (and hence repetitive or re- 
dundant) in the sense that if it were missing the message would still be 
essentially complete, or at least could be completed. 

It is most interesting to note that the redundancy of English is just about 4 
50 per cent, so that about half of the letters or words we choose in writing 
or speaking are under our free choice, and about half (although we are not 
ordinarily aware of it) are really controlled by the statistical structure of 
the language. Apart from more serious implications, which again we will 
postpone to our final discussion, it is interesting to note that a language 
must have at least 50 per cent of real freedom (or relative entropy) in the 
choice of letters if one is to be able to construct satisfactory crossword 
puzzles. If it has complete freedom, then every array of letters is a cross- 
word puzzle. If it has only 20 per cent of freedom, then it would be impos- 
sible to construct crossword puzzles in such complexity and number as 
would make the game popular. Shannon has estimated that if the English 
language had only about 30 per cent redundancy, then it would be possible 
to construct three-dimensional crossword puzzles. 

Before closing this section on information, it should be noted that the 
real reason that Level A analysis deals with a concept of information which 
characterizes the whole statistical nature of the information source, and is 
not concerned with the individual messages (and not at all directly con- 
cerned with the meaning of the individual messages) is that from the point 
of view of engineering, a communication system must face the problem of 
handling any message that the source can produce. If it is not possible or 
practicable to design a system which can handle everything perfectly, then 
the system should be designed to handle well the jobs it is most likely to 
be asked to do, and should resign itself to be less efficient for the rare task. 
This sort of consideration leads at once to the necessity of characterizing 
the statistical nature of the whole ensemble of messages which a given kind 
of source can and will produce. And information, as used in communica- 
tion theory, does just this. 

4 The 50 per cent estimate accounts only for statistical structure out to about eight 
letters, so that the ultimate value is presumably a little higher. 


Although it is not at all the purpose of this paper to be concerned with 
mathematical details, it nevertheless seems essential to have as good an 
understanding as possible of the entropy-like expression which measures 
information. 5 If one is concerned, as in a simple case, with a set of n in- 
dependent symbols, or a set of n independent complete messages for that 
matter, whose probabilities of choice are p 1$ p 2 . . . p n > then the actual ex- 
pression for the information is 

H=-\p 1 log p 2 + p 2 logp 2 + . . . + p n logftj . 


H = -2 i p l \ogp i . 

Where 6 the symbol 2 indicates, as is usual in mathematics, that one is 
to sum all terms like the typical one, p i log p if written as a denning sample. 

This looks a little complicated; but let us see how this expression behaves 
in some simple cases. 

Suppose first that we are choosing only between two possible messages, 
whose probabilities are then p x for the first and p 2 — 1 — p\ for the other. 
If one reckons, for this case, the numerical value of H, it turns out that H 
has its largest value, namely one, when the two messages are equally prob- 
able; that is to say when p x — p 2 — y 2 ; that is to say, when one is completely 
free to choose between the two messages. Just as soon as one message becomes 
more probable than the other (p 1 greater than p 2 , say), the value of H 
decreases. And when one message is very probable (p t almost one and p 2 
almost zero, say), the value of H is very small (almost zero). 

In the limiting case where one probability is unity (certainty) and all the 
others zero (impossibility), then H is zero (no uncertainty at all — no free- 
dom of choice — no information). 

Thus H is largest when the two probabilities are equal (i.e., when one is 
completely free and unbiased in the choice), and reduces to zero when one's 
freedom of choice is gone. 

The situation just described is in fact typical. If there are many, rather 
than two, choices, then H is largest when the probabilities of the various 
choices are as nearly equal as circumstances permit — when one has as much 
freedom as possible in making a choice, being as little as possible driven 
toward some certain choices which have more than their share of prob- 
ability. Suppose, on the other hand, that one choice has a probability near 
one so that all the other choices have probabilities near zero. This is clearly 
a situation in which one is heavily influenced toward one particular choice, 
and hence has little freedom of choice. And H in such a case does calculate 

5 Editor's Note: The basic value of this article is not lost even though the mathe- 
matical presentation is not fully understood. 

6 Do not worry about the minus sign. Any probability is a number less than or equal 
to one, and logarithms of numbers less than one are themselves negative. Thus the minus 
sign is necessary in order that H be in fact positive. 


to have a very small value — the information (the freedom of choice, the 
uncertainty) is low. 

When the number of cases is fixed, we have just seen that then the in- 
formation is the greater, the more nearly equal are the probabilities of 
the various cases. There is another important way of increasing H, namely 
by increasing the number of cases. More accurately, if all choices are equally 
likely, the more choices there are, the larger H will be. There is more 
"information" if you select freely out of a set of fifty standard messages, 
than if you select freely out of a set of twenty-five. 

2.3. Capacity pf a Communication Channel 

After the discussion of the preceding section, one is not surprised that 
the capacity of a channel is to be described not in terms of the number of 
symbols it can transmit, but rather in terms of the information it transmits. 
Or better, since this last phrase lends itself particularly well to a misinter- 
pretation of the word information, the capacity of a channel is to be de- 
scribed in terms of its ability to transmit what is produced out of source 
of a given information. 

If the source is of a simple sort in which all symbols are of the same 
time duration (which is the case, for example, with teletype), if the source 
is such that each symbol chosen represents s bits of information (being 
freely chosen from among 2 8 symbols), and if the channel can transmit, say 
n symbols per second, then the capacity C of the channel is defined to be 
ns bits per second. 

In a more general case, one has to take account of the varying lengths of 
the various symbols. Thus the general expression for capacity of a channel 
involves the logarithm of the numbers of symbols of certain time duration 
(which introduces, of course, the idea of information and corresponds to 
the factor s in the simple case of the preceding paragraph); and also in- 
volves the number of such symbols handled (which corresponds to the 
factor n of the preceding paragraph). Thus in the general case, capacity 
measures not the number of symbols transmitted per second, but rather the 
amount of information transmitted per second, using bits per second as its 

2.4. Coding 

At the outset it was pointed out that the transmitter accepts the message 
and turns it into something called the signal, the latter being what actually 
passes over the channel to the receiver. 

The transmitter, in such a case as telephony, merely changes the audible 
voice signal over into something (the varying electrical current on the tele- 
phone wire) which is at once clearly different but clearly equivalent. But 
the transmitter may carry out a much more complex operation on the mes- 
sage to produce the signal. It could, for example, take a written message 


and use some code to encipher this message into, say a sequence of numbers; 
these numbers then being sent over the channel as the signal. 

Thus one says, in general, that the function of the transmitter is to en- 
code, and that of the receiver to decode, the message. The theory provides 
for very sophisticated transmitters and receivers — such, for example, as 
possess "memories," so that the way they encode a certain symbol of the 
message depends not only upon this one symbol, but also upon previous 
symbols of the message and the way they have been encoded. 

We are now in a position to state the fundamental theorem, produced 
in this theory, for a noiseless channel transmitting discrete symbols. This 
theorem relates to a communication channel which has a capacity of C bits 
per second, accepting signals from a source of entropy (or information) of 
H bits per second. The theorem states that by devising proper coding pro- 
cedures for the transmitter it is possible to transmit symbols over the chan- 
nel at an average rate 7 which is nearly C/H, but which, no matter how 
clever the coding, can never be made to exceed C/H. 

The significance of this theorem is to be discussed more usefully a little 
later, when we have the more general case when noise is present. For the 
moment, though, it is important to notice the critical role which coding 

Remember that the entropy (or information) associated with the process 
which generates messages or signals is determined by the statistical char- 
acter of the process — by the various probabilities for arriving at message 
situations and for choosing, when in those situations, the next symbols. 
The statistical nature of messages is entirely determined by the character 
of the source. But the statistical character of the signal as actually trans- 
mitted by a channel, and hence the entropy in the channel, is determined 
both by what one attempts to feed into the channel and by the capabilities 
of the channel to handle different signal situations. For example, in teleg- 
raphy, there have to be spaces between dots and dots, between dots and 
dashes, and between dashes and dashes, or the dots and dashes would not 
be recognizable. 

Now it turns out that when a channel does have certain constraints of 
this sort, which limit complete signal freedom, there are certain statistical 
signal characteristics which lead to a signal entropy which is larger than 
it would be for any other statistical signal structure, and in this important 
case, the signal entropy is exactly equal to the channel capacity. 

In terms of these ideas, it is now possible precisely to characterize the 
most efficient kind of coding. The best transmitter, in fact, is that which 
codes the message in such a way that the signal has just those optimum 
statistical characteristics which are best suited to the channel to be used — 

7 We remember that the capacity C involves the idea of information transmitted per 
second, and is thus measured in bits per second. The entropy H here measures informa- 
tion per symbol, so that the ratio of C to H measures symbols per second. 


which in fact maximize the signal (or one may say, the channel) entropy 
and make it equal to the capacity C of the channel. 

This kind of coding leads, by the fundamental theorem above, to the 
maximum rate C/H for the transmission of symbols. But for this gain in 
transmission rate, one pays a price. For rather perversely it happens that 
as one makes the coding more and more nearly ideal, one is forced to longer 
and longer delays in the process of coding. Part of this dilemma is met by 
the fact that in electronic equipment "long" may mean an exceedingly 
small fraction of a second, and part by the fact that one makes a compro- 
mise, balancing the gain in transmission rate against loss of coding time. 

2.5. Noise 

How does noise affect information? Information is, we must steadily re- 
member, a measure of one's freedom of choice in selecting a message. The 
greater this freedom of choice, and hence the greater the information, the 
greater is the uncertainty that the message actually selected is some par- 
ticular one. Thus greater freedom of choice, greater uncertainty, greater 
information go hand in hand. 

If noise is introduced, then the received message contains certain dis- 
tortions, certain errors, certain extraneous material, that would certainly 
lead one to say that the received message exhibits, because of the effects of 
the noise, an increased uncertainty. But if the uncertainty is increased, the 
information is increased, and this sounds as though the noise were bene- 

It is generally true that when there is noise, the received signal exhibits 
greater information — or better, the received signal is selected out of a more 
varied set than is the transmitted signal. This is a situation which beau- 
tifully illustrates the semantic trap into which one can fall if he does not 
remember that "information" is used here with a special meaning that 
measures freedom of choice and hence uncertainty as to what choice has 
been made. It is therefore possible for the word information to have either 
good or bad connotations. Uncertainty which arises by virtue of freedom of 
choice on the part of the sender is desirable uncertainty. Uncertainty which 
arises because of errors or because of the influence of noise, is undesirable 

It is thus clear where the joker is in saying that the received signal has 
more information. Some of this information is spurious and undesirable 
and has been introduced via the noise. To get the useful information in 
the received signal we must subtract out this spurious portion. 

Before we can clear up this point we have to stop for a little detour. 
Suppose one has two sets of symbols, such as the message symbols generated 
by the information source, and the signal symbols which are actually re- 
ceived. The probabilities of these two sets of symbols are interrelated, for 
clearly the probability of receiving a certain symbol depends upon what 
symbol was sent. With no errors from noise or from other causes, the re- 


ceived signals would correspond precisely to the message symbols sent; and 
in the presence of possible error, the probabilities for received symbols 
would obviously be loaded heavily on those which correspond, or closely 
correspond, to the message symbols sent. 

Now in such a situation one can calculate what is called the entropy of 
one set of symbols relative to the other. Let us, for example, consider the 
entropy of the message relative to the signal. It is unfortunate that we can- 
not understand the issues involved here without going into some detail. 
Suppose for the moment that one knows that a certain signal symbol has 
actually been received. Then each message symbol takes on a certain prob- 
ability — relatively large for the symbol identical with or the symbols simi- 
lar to the one received, and relatively small for all others. Using this set 
of probabilities, one calculates a tentative entropy value. This is the mes- 
sage entropy on the assumption of a definite known received or signal 
symbol. Under any good conditions its value is low; since the probabilities 
involved are not spread around rather evenly on the various cases, but are 
heavily loaded on one or a few cases. Its value would be zero (see page 000) 
in any case where noise was completely absent, for then, the signal symbol 
being known, all message probabilities would be zero except for one symbol 
(namely the one received), which would have a probability of unity. 

For each assumption as to the signal symbol received, one can calculate 
one of these tentative message entropies. Calculate all of them, and then 
average them, weighting each one in accordance with the probability of the 
signal symbol assumed in calculating it. Entropies calculated in this way, 
when there are two sets of symbols to consider, are called relative entropies. 
The particular one just described is the entropy of the message relative to 
the signal, and Shannon has named this also the equivocation. 

From the way this equivocation is calculated, we can see what its sig- 
nificance is. It measures the average uncertainty in the message when the 
signal is known. If there were no noise, then there would be no uncertainty 
concerning the message if the signal is known. If the information source 
has any residual uncertainty after the signal is known; then this must be 
undesirable uncertainty due to noise. 

The discussion of the last few paragraphs centers around the quantity 
"the average uncertainty in the message source when the received signal is 
known." It can equally well be phrased in terms of the similar quantity 
"the average uncertainty concerning the received signal when the message 
sent is known." This latter uncertainty would, of course, also be zero if 
there were no noise. 

As to the interrelationship of these quantities, it is easy to prove that 

H(x) - H y (x) = H(y) - H x (y) 

where H(x) is the entropy or information of the source of messages; H(y) 
the entropy or information of received signals; H y (x) the equivocation, 
or the uncertainty in the message source if the signal be known; H x (y) the 


uncertainty in the received signals if the messages sent be known, or the 
spurious part of the received signal information which is due to noise. The 
right side of this equation is the useful information which is transmitted 
in spite of the bad effect of the noise. 

It is now possible to explain what one means by the capacity C of a noisy 
channel. It is, in fact, defined to be equal to the maximum rate (in bits per 
second) at which useful information (i.e., total uncertainty minus noise 
uncertainty) can be transmitted over the channel. 

Why does one speak, here, of a "maximum" rate? What can one do, that 
is, to make this rate larger or smaller? The answer is that one can affect 
this rate by choosing a source whose statistical characteristics are suitably 
related to the restraints imposed by the nature of the channel. That is, one 
can maximize the rate of transmitting useful information by using proper 
coding. . . . 

And now, finally, let us consider the fundamental theorem for a noisy 
channel. Suppose that this noisy channel has, in the sense just described, a 
capacity C, suppose it is accepting from an information source character- 
ized by an entropy of H (x) bits per second, the entropy of the received 
signals being H(y) bits per second. If the channel capacity C is equal to or 
larger than H(x), then by devising appropriate coding systems, the output 
of the source can be transmitted over the channel with as little error as 
one pleases. However small a frequency of error you specify, there is a code 
which meets the demand. But if the channel capacity C is less than H(x), 
the entropy of the source from which it accepts messages, then it is impos- 
sible to devise codes which reduce the error frequency as low as one may 

However clever one is with the coding process, it will always be true 
that after the signal is received there remains some undesirable (noise) 
uncertainty about what the message was; and this undesirable uncertainty 
— this equivocation — will always be equal to or greater than H(x) — C. 
Furthermore, there is always at least one code which is capable of reducing 
this undesirable uncertainty, concerning the message, down to a value 
which exceeds H(x) — C by an arbitrarily small amount. 

The most important aspect, of course, is that the minimum undesirable 
or spurious uncertainties cannot be reduced further, no matter how com- 
plicated or appropriate the coding process. This powerful theorem gives a 
precise and almost startlingly simple description of the utmost depend- 
ability one can ever obtain from a communication channel which operates 
in the presence of noise. 

One practical consequence, pointed out by Shannon, should be noted. 
Since English is about 50 per cent redundant, it would be possible to save 
about one-half the time of ordinary telegraphy by a proper encoding 
process, provided one were going to transmit over a noiseless channel. 
When there is noise on a channel, however, there is some real advantage 
in not using a coding process that eliminates all of the redundancy. For 


the remaining redundancy helps combat the noise. This is very easy to 
see, for just because of the fact that the redundancy of English is high, one 
has, for example, little or no hesitation about correcting errors in spelling 
that have arisen during transmission. 

2.6. Continuous Messages 

Up to this point we have been concerned with messages formed out of 
discrete symbols, as words are formed of letters, sentences of words, a mel- 
ody of notes, or a halftone picture of a finite number of discrete spots. 
What happens to the theory if one considers continuous messages, such as 
the speaking voice with its continuous variation of pitch and energy? 

Very roughly one may say that the extended theory is somewhat more 
difficult and complicated mathematically, but not essentially different. 
Many of the above statements for the discrete case require no modification, 
and others require only minor change. 

One circumstance which helps a good deal is the following. As a practi- 
cal matter, one is always interested in a continuous signal which is built 
up of simple harmonic constituents of not all frequencies, but rather of 
frequencies which lie wholly within a band from zero frequency to, say, 
a frequency of W cycles per second. Thus although the human voice 
does contain higher frequencies, very satisfactory communication can be 
achieved over a telephone channel that handles frequencies only up to, 
say, four thousand. With frequencies up to ten or twelve thousand, high 
fidelity radio transmission of symphonic music is possible, etc. 

There is a very convenient mathematical theorem which states that a 
continuous signal, T seconds in duration and band-limited in frequency 
to the range from to W, can be completely specified by stating 2TW num- 
bers. This is really a remarkable theorem. Ordinarily a continuous curve 
can be only approximately characterized by stating any finite number of 
points through which it passes, and an infinite number would in general 
be required for complete information about the curve. But if the curve 
is built up out of simple harmonic constituents of a limited number of 
frequencies, as a complex sound is built up out of a limited number of 
pure tones, then a finite number of parameters is all that is necessary. This 
has the powerful advantage of reducing the character of the communica- 
tion problem for continuous signals from a complicated situation where 
one would have to deal with an infinite number of variables to a consider- 
ably simpler situation where one deals with a finite (though large) number 
of variables. 

In the theory for the continuous case there are developed formulas which 
describe the maximum capacity C of a channel of frequency band-width 
W, when the average power used in transmitting is P, the channel being 
subject to a noise of power N, this noise being "white thermal noise" of a 
special kind which Shannon defines. This white thermal noise is itself band 
limited in frequency, and the amplitudes of the various frequency con- 


stituents are subject to a normal (Gaussian) probability distribution. Under 
these circumstances, Shannon obtains the theorem, again really quite re- 
markable in its simplicity and its scope, that it is possible, by the best 
coding, to transmit binary digits at the rate of 

P + N 
W log 2 — ^- 

bits per second and have an arbitrarily low frequency of error. But this rate 
cannot possibly be exceeded, no matter how clever the coding, without 
giving rise to a definite frequency of errors. For the case of arbitrary noise, 
rather than the special "white thermal" noise assumed above, Shannon 
does not succeed in deriving one explicit formula for channel capacity, but 
does obtain useful upper and lower limits for channel capacity. And he 
also derives limits for channel capacity when one specifies not the average 
power of the transmitter, but rather the peak instantaneous power. 

Finally it should be stated that Shannon obtains results which are neces- 
sarily somewhat less specific, but which are of obviously deep and sweep- 
ing significance, which, for a general sort of continuous message or signal, 
characterize the fidelity of the received message, and the concepts of rate 
at which a source generates information, rate of transmission, and channel 
capacity, all of these being relative to certain fidelity requirements. 


For hundreds of years a few examples of true automatic control systems 
have been known. A very early one was the arrangement on windmills of a 
device to keep their sails always facing into the wind. It consisted simply 
of a miniature windmill which could rotate the whole mill to face in any 
direction. The small mill's sails were at right angles to the main ones, and 
whenever the latter faced in the wrong direction, the wind caught the small 
sails and rotated the mill to the correct position. With steam power came 
other automatic mechanisms: the engine-governor, and then the steering 
servo-engine on ships, which operated the rudder in correspondence with 
movements of the helm. These devices, and a few others such as simple volt- 
age regulators, constituted man's achievement in automatic control up to 
about 20 years ago. 

In the past two decades necessity, in the form of increasingly acute prob- 
lems arising in our ever more complex technology, has given birth to new 
families of such devices. Chemical plants needed regulators of temperature 
and flow; air warfare called for rapid and precise control of searchlights 

* Arnold Tustin, "Feedback," Scientific American, Vol. CLXXXVII, No. 3 (September, 
1952), pp. 48-50, 52-54. 


and anti-aircraft guns; radio required circuits which would give accurate 
amplification of signals. 

Thus the modern science of automatic control has been fed by streams 
from many sources. At first, it now seems suprising to recall, no connection 
between these various developments was recognized. Yet all control and 
regulating systems depend on common principles. As soon as this was 
realized, progress became much more rapid. Today the design of controls 
for a modern boiler or a guided missile, for example, is based largely on 
principles first developed in the design of radio amplifiers. 

Indeed, studies of the behavior of automatic control systems give us new 
insight into a wide variety of happenings in nature and in human affairs. 
The notions that engineers have evolved from these studies are useful aids 
in understanding how a man stands upright without toppling over, how 
the human heart beats, why our economic system suffers from slumps and 
booms, why the rabbit population in parts of Canada regularly fluctuates 
between scarcity and abundance. 

The chief purpose of this article is to make clear the common pattern 
that underlies all these and many other varied phenomena. This common 
pattern is the existence of feedback, or — to express the same thing rather 
more generally — interdependence. 

We should not be able to live at all, still less to design complex control 
systems, if we did not recognize that there are regularities in the relation- 
ship between events — what we call "cause and effect." When the room is 
warmer, the thermometer on the wall reads higher. We do not expect to 
make the room warmer by pushing up the mercury in the thermometer. 
But now consider the case when the instrument on the wall is not a simple 
thermometer but a thermostat, contrived so that as its reading goes above 
a chosen setting, the fuel supply to the furnace is progressively reduced, 
and, conversely, as its readings fall below that setting, the fuel flow is in- 
creased. This is an example of a familiar control system. Not only does 
the reading of the thermometer depend on the warmth of the room, but 
the warmth of the room also depends on the reading of the thermometer. 
The two quantities are interdependent. Each is a cause, and each an effect, 
of the other. In such cases we have a closed chain or sequence — what engi- 
neers call a "closed loop." 

In analyzing engineering and scientific problems it is very illuminating 
to sketch out first the scheme of dependence and see how the various quan- 
tities involved in the problem are determined by one another and by dis- 
turbances from outside the system. Such a diagram enables one to tell at 
a glance whether a system is an open or a closed one. This is an important 
distinction, because a closed system possesses several significant properties. 
Not only can it act as a regulator, but it is capable of various "self-excita- 
tory" types of behavior — like a kitten chasing its own tail. 

The now-popular name for this process is "feedback." In the case of the 
thermostat, the thermometer's information about the room temperature 


is fed back to open or close the valve, which in turn controls the tempera- 
ture. Not all automatic control systems are of the closed-loop type. For 
example, one might put the thermometer outside in the open air, and 
connect it to work the fuel valve through a specially shaped cam, so that 
the outside temperature regulates the fuel flow. In this open sequence sys- 
tem the room temperature has no effect; there is no feedback. The control 
compensates only that disturbance of room temperature caused by varia- 
tion of the outdoor temperature. Such a system is not necessarily a bad or 
useless system; it might work very well under some circumstances. But it 
has two obvious shortcomings. Firstly, it is a "calibrated" system; that is to 
say, its correct working would require careful preliminary testing and spe- 
cial shaping of the cam to suit each particular application. Secondly, it 
could not deal with any but standard conditions. A day that was windy 
as well as cold would not get more fuel on that account. 

The feedback type of control avoids these shortcomings. It goes directly 
to the quantity to be controlled, and it corrects indiscriminately for all 
kinds of disturbance. Nor does it require calibration for each special con- 

Feedback control, unlike open-sequence control, can never work with- 
out some error, for the error is depended upon to bring about the correc- 
tion. The objective is to make the error as small as possible. This is subject 
to certain limitations, which we must now consider. 

The principle of control by feedback is quite general. The quantities 
that it may control are of the most varied kinds, ranging from the frequency 
of a national electric-power grid to the degree of anesthesia of a patient 
under surgical operation. Control is exercised by negative feedback, which 
is to say that the information fed back is the amount of departure from 
the desired condition. 

Any quantity may be subjected to control if three conditions are met. 
First, the required changes must be controllable by some physical means, 
a regulating organ. Second, the controlled quantity must be measurable, 
or at least comparable with some standard; in other words, there must be 
a measuring device. Third, both regulation and measurement must be 
rapid enough for the job in hand. 

As an example, take one of the simplest and commonest of industrial re- 
quirements: to control the rate of flow of liquid along a pipe. As the regu- 
lating organ we can use a throttle valve, and as the measuring device, some 
form of flowmeter. A signal from the flowmeter, telling the actual rate of 
flow through the pipe, goes to the "controller"; there it is compared with 
a setting giving the required rate of flow. The amount and direction of 
"error," i.e., deviation from this setting, is then transmitted to the throttle 
valve as an operating signal to bring about adjustment in the required 

In flow-control systems the signals are usually in the form of variations 
in air pressure, by which the flowmeter measures the rate of flow of the 


liquid. The pressure is transmitted through a small-bore pipe to the con- 
troller, which is essentially a balance piston. The difference between this 
received pressure and the setting regulates the air pressure in another 
pipeline that goes to the regulating valve. 

Signals of this kind are slow, and difficulties arise as the system becomes 
complex. When many controls are concentrated at a central point, as is 
often the case, the air-pipes that transmit the signals may have to be hun- 
dreds of feet long, and pressure changes at one end reach the other only 
after delays of some seconds. Meanwhile the error may have become large. 
The time-delay often creates another problem: overcorrection of the error, 
which causes the system to oscillate about the required value instead of 
settling down. 

For further light on the principles involved in control systems let us 
consider the example of the automatic gun-director. In this problem a mas- 
sive gun must be turned with great precision to angles indicated by a fly- 
power pointer on a clock-dial some hundreds of feet away. When the 
pointer moves, the gun must turn correspondingly. The quantity to be 
controlled is the angle of the gun. The reference quantity is the angle of 
the clock-dial pointer. What is needed is a feedback loop which constantly 
compares the gun angle with the pointer angle and arranges matters so 
that if the gun angle is too small, the gun is driven forward, and if it is too 
large, the gun is driven back. 

The key element in this case is some device which will detect the error 
of angular alignment between two shafts remote from each other, and 
which does not require more force than is available at the fly-power trans- 
mitter shaft. There are several kinds of electrical elements that will serve 
such a purpose. The one usually selected is a pair of the miniature alter- 
nating-current machines known as selsyns. The two selsyns, connected 
respectively to the transmitter shaft and the gun, provide an electrical sig- 
nal proportional to the error of alignment. The signal is amplified and fed 
to a generator which in turn feeds a motor that drives the gun. 

%. ^ ^c ^ >|< 

Long before man existed, evolution hit upon the need for anti-oscillating 
features in feedback control and incorporated them in the body mecha- 
nisms of the animal world. Signals in the animal body are transmitted by 
trains of pulses along nerve fibers. When a sensory organ is stimulated, the 
stimulus will produce pulses at a greater rate if it is increasing than if it is 
decreasing. The maximum response, or output signal, occurs before the 
maximum of the stimulus. This is just the anticipatory type of effort (the 
time-lead) that is required for high-accuracy control. Physiologists now be- 
lieve that the anticipatory response has evolved in the nervous system for, 
at least in part, the same reason that man wants it in his control mecha- 
nisms — to avoid overshooting and oscillation. Precisely what feature of the 
structure of the nerve mechanism gives this remarkable property is not yet 
fully understood. 


Fascinating examples of the consequences of interdependence arise in 
the fluctuations of animal populations in a given territory. These interac- 
tions are sometimes extremely complicated. Charles Darwin invoked such 
a scheme to explain why there are more bumblebees near towns. His ex- 
planation was that near towns there are more cats; this means fewer field 
mice, and field mice are the chief ravagers of bees' nests. Hence near towns 
bees enjoy more safety. 

The interdependence of animal species sometimes produces a periodic 
oscillation. Just to show how this can happen, and leaving out complica- 
tions that are always present in an actual situation, consider a territory in- 
habited by rabbits and lynxes, the rabbits being the chief food of the lynxes. 
When rabbits are abundant, the lynx population will increase. But as the 
lynxes become abundant, the rabbit population falls, because more rabbits 
are caught. Then as the rabbits diminish, the lynxes go hungry and decline. 
The result is a self-maintaining oscillation, sustained by negative feedback 
with a time-delay. 

The periodic booms and slumps in economic activity stand out as a 
major example of oscillatory behavior due to feedback. In 1935 the econo- 
mist John Maynard Keynes gave the first adequate and satisfying account 
of the essential mechanisms on which the general level of economic activity 
depends. Although Keynes did not use the terminology of control-system 
theory, his account fits precisely the same now-familiar pattern. 

Keynes' starting point was the simple notion that the level of economic 
activity depends on the rate at which goods are bought. He took the essen- 
tial further step of distinguishing two kinds of buying — of consumption 
goods and of capital goods. The latter is the same thing as the rate of 
investment. The money available to buy all these goods is not automatically 
provided by the wages and profits disbursed in making them, because nor- 
mally some of this money is saved. The system would therefore run down 
and stop if it were not for the constant injection of extra demand in the 
form of new investment. Therefore the level of economic activity and em- 
ployment depends on the rate of investment. This is the first dependence. 
The rate of investment itself, however, depends on the expectation of profit, 
and this in turn depends on the trend, present and expected, of economic 
activity. Thus not only does economic activity depend on the rate of in- 
vestment, but the rate of investment depends on economic activity. 

Modern theories of the business cycle aim to explain in detail the nature 
of these dependences and their characteristic non-linearities. This clarifica- 
tion of the mechanisms at work immediately suggests many ways in which, 
by proper timing of investment expenditure, by more rational business 
forecasting, and so on, a stable level of optimal economic activity may be 
achieved in the near future. The day when it can unequivocally be said 
that slumps belong to the past will certainly be the beginning of a brighter 
chapter in human history. 


The examples of feedback given here are merely a few selected to illus- 
trate general principles. ... In this article on "theory" I should like to 
touch on a further point: some ways in which the properties of automatic 
control systems may be investigated in detail, and their performance per- 

Purely mathematical methods are remarkably powerful when the sys- 
tem happens to be linear. Sets of linear differential equations are the happy 
hunting ground of mathematicians. They can turn the equations into a 
variety of equivalent forms, and generally play tunes on them. For the 
more general class of non-linear systems, the situation is quite different. 
There exact determination of the types of motion implied by a set of de- 
pendences is usually very laborious or practically impossible. 

To determine the behavior of such complex systems two principal kinds 
of machines are being used. The first is the "analogue" computer. The 
forms of this type of computer are varied, but they all share a common 
principle: some system of physical elements is set up with relationships 
analogous to those existing in the system to be investigated, and the inter- 
dependence among them is then worked out in proportional terms. The 
second kind of aid is the new high-speed digital computer. In this type 
of machine the quantities are represented by numbers rather than by physi- 
cal equivalents. The implications of the equations involved are explored 
by means of arithmetical operations on these numbers. The great speed of 
operation of these modern machines makes possible calculations that could 
not be attempted by human computers because of the time required. 

The theory of control systems is now so well understood that, with such 
modern aids, the behavior of even extremely complex systems can be 
largely predicted in advance. Although this is a new branch of science, it 
is already in a state that ensures rapid further progress. 

At the commencement of this account of control systems it was necessary 
to assume that the human mind can distinguish "cause" and "effect" and 
describe the regularities of nature in these terms. It may be fitting to con- 
clude by suggesting that the concepts reviewed are not without relevance 
to the grandest of all problems of science and philosophy: the nature of 
the human mind and the significance of our forms of perception of what 
we call reality. 

In much of the animal world, behavior is controlled by reflexes and in- 
stinct — mechanisms in direct response to the stimulus of the immediate 
situation. In man and the higher animals the operation of what we are 
subjectively aware of as the "mind" provides a more flexible and effective 
control of behavior. It is not at present known whether these conscious 
phenomena involve potentialities of matter other than those we study in 
physics. They may well do so, and we must not beg this question in the 
absence of evidence. 

Whatever the nature of the means or medium involved, the function of 
the central nervous system in the higher animals is clear. It is to provide 


a biologically more effective control of behavior under a combination of 
inner and environmental stimuli. An inner analogue or simulation of 
relevant aspects of the external world, which we are aware of as our idea 
of the environment, controls our responses, superseding mere instinct or 
reflex reaction. The world is still with us when we shut our eyes, and we 
use the "play of ideas" to predict the consequences of action. Thus our 
activity is adjusted more elaborately and advantageously to the circum- 
stances in which we find ourselves. 

This situation is strikingly similar in principle (though immensely more 
complex) to the introduction of a predictor in the control of a gun, for 
all predictors are essentially analogues of the external situation. The func- 
tion of mind is to predict, and to adjust behavior accordingly. It operates 
like an analogue computer fed by sensory clues. 

It is not suprising, therefore, that man sees the external world in terms 
of cause and effect. The distinction is largely subjective. "Cause" is what 
might conceivably be manipulated. "Effect" is what might conceivably be 

Man is far from understanding himself, but it may turn out that his 
understanding of automatic control is one small further step toward that 

Supervision in Control and Discipline 

In the vocabulary of management there is a series of key descriptive 
terms which are closely related — so much so, indeed, that it is difficult to 
refer to one without saying something that will bear upon several others. 
The reason for this is that management itself is most effective when all its 
parts are closely integrated, when the boundaries within its field are at 
least partially broken down and its divisions properly merged. In fact, the 
integration is so tight that classification becomes a problem. It is hard for 
the executive to be articulate, therefore, when attempting to write about 
what he does, it is partly for this reason that management is sometimes 
considered a mystery. It is for this reason also that it is often scornfully 
asserted that there is no such thing as management skill, that there are no 
true principles of administration, that the whole thing is a front designed 
to cover up the exploitations of those in power. 

There was a time when most discussions of management revolved about 

* Marshall E. Dimock, The Executive in Action (New York: Harper & Bros., 1945), 
chap. 19, pp. 216-25. 


the word "control." This is no longer true. Control has been broken down 
into its constituent parts and these are now generally used in lieu of the 
original term. This does not mean that the word "control" has lost its 
usefulness and can be discarded, because there is still an aspect of the 
executive function which it accurately describes. Nevertheless, there has 
been a fundamental change in thinking, and certain words which were 
once central in the executive's attitudes, assumptions, and vocabulary have 
now either been abandoned for more satisfactory synonyms or greatly cir- 
cumscribed in their applicability. Other key words which have suffered a 
similar metamorphosis are "power" and "command." 

Mary Parker Follett was one of the first in the field of management to 
show the need for a change of emphasis and attitude. She has been sup- 
ported in recent years by many other thinkers and writers of influence, 
among them Harlow S. Person, Elton Mayo, Ordway Tead, Henry C. Met- 
calf, John M. Gaus, and L. Urwick. The mo dern approach has been to 
emphasize such substitutes for control as function, co-ordination, co-opera-" 
tion, leadership, supervision, standards, and measurement. Thus the influ- 
ence of the skills of engineering and psychology have tended to supersede 
that of the military and the ecclesiastical. Management, in common with 
most disciplines, has felt the influence of democratic forces. The tendency 
is to broaden the sphere of authority and influence and to seek power with 
people instead of power over people. Nevertheless despite these changes, 
an appropriate place remains for the function described by the term "con- 

Control is the analysis of present performance, in the light of fixed goals 
and standards, in order to determine the extent to which accomplishment 
measures up to executive orders and expectations. This measurement is 
secured by a careful scrutiny of both past and present work so that those 
who have been entrusted with its responsibility may be held accountable, 
and so that information thus secured may be used as the basis of tightening 
supervision where needed, and perfecting plans for the future. The control 
function, therefore, is closely dependent upon planning, units of measure- 
ment, direction, and supervision. The most concise description is to call it 
the checkup. 

The layman expresses this idea of control when he characterizes an 
organization as tightly or loosely run. By this he usually means the presence 
or absence of a person in command who is on his job bringing careless and 
lazy employees to account, and seeing that they do not mill aimlessly about. 
Under adequate control there is an appreciation of order, an attention to 
duty, a sense of organization, discipline, and morale. But none of these 
can be expected when the function of the control activity is not recognized 
and employees are permitted to drift. Discipline is as important to group 
activity as enlightened treatment, because these two are the components of 
an important entity. 

The methods and techniques of supervision and control must be ad- 


justed to each level of co-ordination and direction. At the top, for example, 
the chief executive is close to the department heads with whom he works. 
He learns from direct personal contact with them just how much they 
know about their end of the work, to what extent they are efficiently direct- 
ing and supervising their employees, and what weaknesses there are in 
their professional equipment, from the standpoint both of the job they 
presently occupy and of positions of greater responsibility which may be 
in view. Nevertheless, however skillful an executive may be in analyzing 
his subordinates, in his understanding of human nature, or in responding 
to the state of morale in any part of the organization, he cannot, if he is 
wise, afford to rely entirely upon these firsthand impressions. Induction 
and insight into human nature are important but they are not enough. 
The executive must also create objective standards by which assignments 
may be fairly judged in the light of actual performance. 

One reason for this is that the executive is fallible. He may respond to 
one kind of personality and not to another. Like most people, he sometimes 
fails to see through the man who talks a good game. Some fakers are un- 
usually persuasive; many are good bluffers; they convince you that they 
are world beaters; but when you study their actual record of performance 
and the effect of their methods on their employees, you discover a vast gulf 
between the impression they create and the work they actually turn out. 
The quiet, modest man is often more effective than the flashy individual 
who makes a good first impression which he cannot live up to. The best 
workers in any organization are usually of the steady, reliable type. The 
more volatile individual is like a flash in the pan; he scintillates for a 
moment but quickly subsides. 

To the extent that plans and assignments are clear, that authority is 
specifically and unmistakably delegated, and objective units of performance 
worked out and applied, to that extent may the impressions of the execu- 
tive and the actual performance of the individual be reconciled and com- 

Applying this to a concrete situation, let us consider the control function 
by which I checked on the work of the Recruitment Division of the RMO. 1 
Suppose, for example, that after planning and issuing the appropriate in- 
structions, the head of the Recruitment Division was made responsible for 
securing 2,000 skilled and experienced seafaring men in thirty days. At 
the end of that period the question was whether they had been obtained. 
Assuming that the answer was to the affirmative, the next test was qualita- 
tive — were they sufficiently experienced to assure the efficient manning and 
operation of the vessels to which they were assigned? If I was satisfied on 
this score also, I had then to find out whether the methods employed in 
the recruiting process were as efficient and economical as possible from the 
standpoint of the budget and personnel involved in the operation. This 

l Editor's Note: Recruitment and Manning Organization. 


meant reducing costs to measurable standards and comparing them with 
those of similar organizations. We had also to know whether these costs 
were increasing or declining over a period of time. 

This composite measuring rod became a vital control device, revealing, 
as it did, any deviation from the desired level of performance. When a 
variation did occur, it became my responsibility to discover the reason and 
to institute remedial action if necessary. 

Another test which we applied to the RMO was whether, in the recruit- 
ment operation, the agencies dealt with were treated with sufficient con- 
sideration and courtesy to assure their future co-operation and good will. 
Had our employees shown that they knew their business, and had they 
created a relationship that would assure a ready return on the investment? 
Then came the question of the field recruiters themselves: did they have 
confidence in the head of the Recruitment Division? Were they getting 
clear instructions, training, direction, and co-ordination? Was their morale 
good? The final test was the impact of the campaign upon the men re- 
cruited, because if they were not efficiently and considerately handled they 
would be dissatisfied or disgruntled, and word would spread about that 
this was a poor outfit with which to do business. 

From the above analysis, two factors stand out. First, units of measure- 
ment apply to internal considerations as well as to parties of interest out- 
side the organization. Second, some factors are more easily measured than 
others because some are numerical and hence quantitative, while others 
are qualitative and thus more difficult to objectify. But in either case, it is 
the executive's responsibility to perfect adequate tests which are both ob- 
jective and recurrent in order that a norm may be created from which 
divergenices immediately stand out. 

At the departmental level of performance a means of testing the extent 
to which a subordinate knows his business and is inspiring confidence and 
good will is through the periodic scrutiny of outgoing correspondence. This 
means that the executive should occasionally send all the outgoing mail 
from a particular division in order to judge this question for himself. This 
should be done at an unexpected time so that the typical level of per- 
formance might be examined. Such checks add, of course, to the burden of 
the top executive, but from the standpoint of the discharge of his control 
function they seem indispensable. Such a periodic scrutiny is a sound 
method of confirming or disproving the personal impressions which an 
executive has gained of the work of a particular subordinate with regard 
to the problems and policies arising in his department. 

At lower levels of co-ordination the procedure is substantially the same, 
in that the control function is a combination of face-to-face impressions 
plus an objective scrutiny of performance. Here, however, there is an im- 
portant difference in that larger numbers of persons are involved so that 
objective criteria must be relied upon more than personal impressions. 
Another difference is that at these levels of performance objectification is 


often more feasible because the work is usually specified in greater detail 
and there is less opportunity for individual discretion and policy deter- 
mination. It can easily be ascertained, for example, how many words a 
minute a stenographer can write and transcribe, how efficiently Selective 
Service records can be processed and filed, the batting average of port 
executives in providing seamen in the right categories. It is especially in 
these mechanical areas, where instructions may be specifically developed, 
that time and motion studies and statistical performance analyses can con- 
tribute the most accurate and measurable information. 

The management function is the unfolding and guiding of a large policy, 
with successive elaboration of its details at each level of supervision and 
co-ordination in order to provide a continuous check from the top of the 
enterprise to the bottom. If, at the top level, the objectives and policies are 
clear, then at the next lower stages the procedural steps involved in giving 
them effect may be easily translated into practical working details. It is 
similar to the process whereby a problem is analyzed, grand strategy is 
determined, and a step-by-step breakdown of the strategy is developed 
until, at the point of ultimate application, the separate factors flow in- 
evitably from the logical determinations at each of the higher levels. The 
control function, like the directing and the supervisory functions, must 
then follow through to see that each move occurs in the manner deter- 
mined and to assure a complete coincidence between assignment and per- 

In determining the effectiveness of his control devices, the executive's 
ultimate norm is the extent to which his organization consistently hits the 
mark. If the predetermined goals are being reached routinely, then his . 
control and supervisory methods must be sound. For example, in the RMO 
we took a complete inventory of accomplishment at the end of 1943, when 
we had been in operation for about eighteen months. Making use of our 
principal criteria this is what we found: Vessel delays for temporary want 
of crew had shrunk steadily from fifteen ships a fortnight in mid-1942 to 
an average of two ships a fortnight by the end of 1943. The attrition of 
the labor force had shrunk multifold from 100 per cent a year in the latter 
part of 1941 to from 20 to 25 per cent two years later, constituting the 
greatest improvement in manpower conservation of any wartime industry. 
Moreover, the prewar ratio of more than 25 men ashore for each 100 men 
afloat had been cut to less than 15 men ashore for each 100 afloat, indicat- 
ing a substantial progress toward the optimum use of seagoing manpower. 
And finally, enough seamen had been recruited, trained, or upgraded since 
Pearl Harbor to meet all demands adding some 90,000 new men, which 
was 20,000 more than the total active labor force in the industry at the 
time the war began. 

Akin to the analytical process involved in the establishment of norms 
is an accompanying system of appropriate rewards and sanctions. When a 
man's performance is as good as or better than expected, his supervisor 


must sustain it by appropriate recognition. There are several ways in which 
this is done: in one category are the financial rewards which consist of 
promotions, increases of salary, bonuses, and incentive plans. Increasingly, 
however, it is now recognized that financial incentives alone are not suffi- 
cient because, contrary to what the classical economist has assumed, a man 
is more than a calculating animal — he is interested in more than financial 
gain. In addition to monetary rewards and often more effective, therefore, 
are appreciation for work well done, recognition for superior work within 
the group, and increased responsibility and influence either within the 
group or at the next higher level of co-ordination. 

On the other hand, when an employee fails to perform at the level of 
efficiency that has been established, then a corresponding system of sanc- 
tions and penalties must be imposed. Again, one device is financial, involv- 
ing a warning that if his work does not improve he will be demoted and 
his income reduced. This method is usually undesirable in the long run 
because it creates a dissatisfied worker and one who has lost standing 
within the group. Ordinarily, therefore, it is better to make a clean cut 
and to advise him to go elsewhere. Sometimes, however, a temporary sanc- 
tion produces the desired effect, especially when the offender is lazy and 
not putting forth his best effort. Perhaps the best method of dealing with 
this situation is to show him how he might improve his output and do a 
proper job. And sometimes it is the story of the square peg in the round 
hole, in which case the supervisor should transfer the misfit to a position 
where he can do the work for which he is best qualified. 

If, however, after repeated warnings and all the instruction and encour- 
agement which the supervisor can afford, an employee is still unable to 
qualify, then the sanction must be imposed of requiring him to seek work 
elsewhere. Missing cylinders cause those which might operate at full effi- 
ciency to fall down in the work of the organization as a whole. This is 
similar to a law of economics which states that a debased currency has the 
effect of lowering the value of all currency. 

Ax\ efficient enterprise is one in whichthere is loyalty to the program 
and xo its executive leadership on the part of all concerned. Only a thor- 
oughly loyal organization is an effective instrument of performance^ In 
the long run, of course, these loyalties must be deserved rather than forced. 
Nevertheless, in a realistic consideration of the matter, it must be recog- 
nized that the winning of consent involves sanctions and penalties which 
often usefully supplement the natural inclinations and desires of em- 
ployees toward the good of the enterprise. 

The problem of organizational loyalty is complicated, however, .in a 
situation where group pressures from the outside are strong. In the case 
of the RMO, for example, we were inevitably affected by the keen rivalries 
which existed between ship operators and the maritime unions, a difficulty 
further complicated by the jurisdictional conflicts which flourished within 
each of these groups. The resulting pressures upon individuals within the 


RMO, leading to a natural conflict of allegiance, was a constant force with 
which we had to reckon. An official on our staff formerly identified with 
the operators, for example, was inclined to retain their point of view in 
the expectation that after the war he would, in all probability, return to 
their fold. Similarly, one who had been identified with a maritime labor 
union recognized that in the long run his bread was buttered on that side. 
Nevertheless, in order to do its job well, the RMO had to require a primary 
loyalty to its own purpose, insisting on an attitude of neutrality in dealing 
with and servicing alike all operators and all maritime labor unions. 

The administrative problem of securing and maintaining this loyalty in 
the RMO became one of the principal aspects of the executive's role with 
regard to supervision and control. It involved constant indoctrination, a 
continual checking on individual actions taken, and a frank and open ex- 
posure of any move which seemed prejudiced in favor of one interest group 
or the other. In an organization such as the RMO, created for a specific 
purpose and limited to the period of the war, this was more difficult than 
it would have been in the case of a permanent enterprise. When employees 
know that their careers are linked to an organization which may be ex- 
pected to stay in existence indefinitely, it is easier to command their un- 
divided loyalty and support. Appeals to professionalism are then bound 
to have more effect. From the standpoint of the control activity of the 
RMO, therefore, a principal executive responsibility was to assure our- 
selves that our policies and standards of performance, based upon objective 
criteria, where recognized and maintained by all in order that favoritism, 
special pleading, and the seeking of advantage by one group or another 
might be neutralized and, if possible, eliminated. 

To this end, there is no substitute for plain dealing. Whenever an eva- 
sion or infraction of objective standards is discovered, it must be brought 
openly and forcefully to the attention of the offending individual with a 
warning that a repetition might mean dissociation from the enterprise. 
Tolerance in a question of this kind is a dangerous luxury, because if one 
official is permtited to take advantage of a situation for the benefit of the 
particular group which is pressuring him, others are justified in thinking 
that they have the same privilege. This would result in an anomalous situa- 
tion with everyone working at cross-purposes, and ultimately the centri- 
fugal forces engendered would become so strong that the organization 
would fly apart. In any realistic view of these considerations, therefore, in- 
doctrination and coercion cannot be eliminated, especially in an enterprise 
where social and economic conflict is inherently involved. In these circum- 
stances the executive must be tough and, when infractions occur, must put 
all the cards on the table. Otherwise the matter will get out of hand, the 
executive will see his enterprise chopped to pieces, and may well lose his 
own neck as well. 

In summary, this may be said; Powerful forces and conflicting interests^ 
.are at work in all forms of organization. In some types of enterprise, espe- 


daily those involving social conflict, group pressures are stronger than in 
others. ^Where they are great, the executive must necessarily possess more 
stamina, more energy, more ruthlessness, and a clearer definition of pur- 
poses and loyalties than where the pressures are less pronounced. If, how- 
ever, the purposes of the enterprise are clearly formulated, if the goals are 
definite, indoctrination effective, and the norms of performance simply 
stated, then the problem is less difficult. To the executive who works hard 
at his task and whose personal influence and effectiveness are sufficient, 
there is no managerial situation which cannot be licked. 

Like all human endeavor, however, the chances of securing employee 
loyalty and attachment to principles are more likely of achievement when 
working relationships extend over a long period of time, when men and 
women can look forward to a continuing association. Ultimately, loyalties 
are one of the most important elements in human behavior. They are 
built upon incentives and considerate treatment, tempered with propping 
and checking where control is indicated. In the best sense, therefore, the 
successful executive is he who is the best manipulator of all the forces and 
elements with which he must work. 

The Grapevine 

The grapevine is a lot like the weather. All of us have experienced it, 
but we do not know what to do about it. Like the weather, it is sometimes 
cloudy when we would prefer it to be sunny, and vice versa. It is my pur- 
pose in discussing this subject with you this morning to explain just what 
the office grapevine is and how it typically operates in a business, based 
upon the latest research information. Finally, we will explore the many 
different ways in which you can make constructive use of your office grape- 
vine. We shall see that the grapevine is not all bad in a company. 

The impression which I receive as I discuss the grapevine before different 
management groups is that most managers would rather leave the subject 
alone. They have their good reasons. The grapevine is intangible, and it 
is much easier to deal with tangible objects. Anyway, managers lack con- 
trol of it; so why not ignore it and devote time to items which can be 
rather directly controlled. Most managers are not even sure they have any 
responsibility concerning the grapevine in their department. Their job 

* Keith Davis, Speech before the American Management Association, Annual Office 
Management Conference, New York City, October 17, 1956. 


description does not say so; it is not shown on the organization chart; and 
their manager usually has not mentioned it (except occasionally to wish 
it were dead). Yes, indeed, managers have good reasons for ignoring the 
grapevine or pretending it is not there; yet after many, many discussions, 
I am convinced that the situation is much like that of the fox in Aesop's 
fable. You will remember that the fox sought some grapes, but they were 
very high in the grape arbor and he could not reach them. Finally, he de- 
cided, "Those grapes are sour and aren't worth having anyway." In the 
same manner, many an office manager has decided that there is nothing but 
sour grapes on the office grapevine. Here are some actual comments of 
managers (I do not imply that these comments are typical of all managers, 
but comments like these are certainly plentiful): 

The grapevine never gives us anything but trouble; so I stay away from it as 
much as I can. 

Don't talk to me about communicating through the grapevine. I wouldn't trust 
it for any purpose. 

If I could get rid of the grapevine in my office, my troubles would be over. 

Admittedly, this last manager has a good idea! The grapevine is a thorn 
in the side of every office manager. It regularly offers resistance to his formal 
orders, or amends them, or creates rumor. It is in the true sense a trouble- 
maker. How easy and convenient it would be if an office manager could 
simply abolish the grapevine! Perhaps he could place a notice on the bul- 
letin board saying: "Effective at 12:00 noon tomorrow, October 18, the 
grapevine in this office is abolished." But we are daydreaming, aren't we? 
If there is one thing you and I have learned from our experience and re- 
search, it is that homicide will not work with the grapevine. It cannot be 
abolished, rubbed out, hidden under a basket, chopped down, tied up, 
murdered, or stopped. If we suppress it in one place, it will pop out in 
another. If we cut off one of its sources, it merely moves to another one — 
quite similar to the way we change from one channel to another on our 
TV set. It is as hard to kill as the mythical glass snake — that when it is 
struck, breaks itself into fragments and grows a new snake out of each 
piece. In a sense, the grapevine is man's birthright, because whenever man 
congregates into groups of two or more the grapevine is sure to develop. 
It may use smoke signals, jungle tom-toms, taps on the prison wall, ordi- 
nary conversation, or some other method, but it will always be there. 

What Is the Grapevine? 

Since the grapevine is here to stay, perhaps we had better take some time 
to explain what it is and how it operates. The grapevine is the communica- 
tion system of the informal organization in business. A typical business is 
divided into two great organizational systems — formal and informal. The 
formal organization is the one usually shown on organization charts, and 
it is built by means of a chain of command in which authority is delegated 
successively from one person to another. The maintenance of this chain 


of command requires an elaborate network of orders, instructions, and re- 
ports, which constitute the formal communication system of the business. 
The informal organization, on the other hand, arises from the social rela- 
tionships of people. It is neither required nor controlled by the manage- 
ment. To serve this informal organization, an informal communication 
system arises. It is variable, dynamic, and fickle, running back and forth 
across organizational lines and rapidly changing its course. Hence, the term 
"grapevine" arose to describe its meandering hither and yon, back and 
forth, in the manner of real grapevine. 

One of my newspaper friends after an interview poetically described the 
grapevine as follows: 

With the rapidity of a burning powder train, information flows like magic out 
of the woodwork, past the water fountain, past the manager's door and the jani- 
tor's mop closet. As elusive as a summer zephyr, it niters through steel walls, bulk- 
heads or construction glass partitions, from the sub-basement to the rafters, from 
office boy to executive. 

It carries good news and bad, fact as well as fancy, without discrimination. It 
cares nothing about reputation, nothing about civil rights; it has no respect for 
persons or for prerogatives of management; it will carve up and serve the big 
brass, the shop foreman, and the stenographer with fine impartiality. 1 

The important point which we must recognize is that the grapevine is a 
natural, normal activity. It is an essential part of the total human environ- 
ment. There is nothing inherently evil about the grapevine, just as there 
is nothing inherently evil about the weather. To be sure, we gripe and 
groan about the weather, but we would all perish without the rain, sun 
and other ingredients which make up the weather. Some authorities have 
suggested that in a similar manner businesses would perish if they did not 
have a grapevine to fill in the gaps which the formal communication sys- 
tem leaves. If you will, think for a moment about your own business and 
how you would feel if you were absolutely sure that the grapevine was 
"dead" in your company. You would be worried, wouldn't you? Your abil- 
ity to build teamwork, motivate your people, and create identification with 
the company would be restricted, wouldn't it? In fact, if employees are so 
uninterested in their work that they do not engage in shop-talk about it, 
we usually say that they are maladjusted. And if they are so disinterested 
in their associates that they do not discuss who will get the next promotion 
and why Martha was late to work, we often suspect they are abnormal. The 
definite conclusion for you, the manager, is: be glad you have a grapevine. 
It belongs there, and you would have a "sick" office without it. 

How Does the Grapevine Operate? 

Managers occasionally get the impression that the grapevine operates 
like a long chain in which A tells B, who tells C, who then tells D, and so 
on until twenty persons later Y gets the information — very late and very 

1 Joseph K. Shepard, The Indianapolis Star Magazine, October 2, 1955. 


incorrect. Sometimes the grapevine may operate this way, but research 
shows that it generally follows a different pattern which works something 
like this: A tells three or four selected others (such as B, R, and F). Only 
one or two of these receivers will then pass on the information, and again 
they will usually tell more than one person. Then as the information be- 
comes older and the proportion of those knowing it gets larger, it gradually 
dies out because those who receive it do not repeat it. In professional litera- 
ture, I have called this network a "cluster chain" because each link in the 
chain tends to inform a cluster of other people instead of only one person. 

If we accept the idea that this cluster chain is predominant, then it is 
simply a matter of logic to conclude that only a few persons are active 
communicators on the grapevine for any particular bit of information. If, 
for example, 87 clerks in your office know that Mabel got married secretly 
last Saturday, probably the word was spread to these 87 by only 10 or 15 
of your clerks. The remainder knew the information, but did not spread 
it. These persons who keep the grapevine active are called "liaison individ- 
uals" in the professional literature. For example, in one company which I 
studied, when a quality-control problem occurred, 68 per cent of the execu- 
tives knew about it, but only 20 per cent of them spread the information. In 
another case, when a manager planned to resign, 81 per cent of the execu- 
tives knew about it, but only 1 1 per cent passed the news on to others. 

Up to this point my picture of the grapevine network is probably con- 
sistent with your own ideas. Probably at this moment you are thinking, 
"Martha is one of those liaison individuals; if I could just hush her, maybe 
we could get some work done around here." I doubt that your problem is 
that simple. If you "hush" Martha, probably someone else will take her 
place on the grapevine, because the grapevine is more a product of the 
situation than it is of the person. In my own research, I have uncovered 
no strong evidence that any one person or group consistently acts as liaison 
agent to the exclusion of all others. Now it is true that some of us are more 
active on the grapevine than our associates but the evidence is clear that — 
given the proper situation and motivation — any of us tend to become active 
on the grapevine. For example, in three successive surveys I made in one 
group of 60 executives, the liaison agents were completely different in each 

Most people tend to be active on the grapevine when they have cause to 
be. This means that they are acting partly in a predictable way. This ele- 
ment of cause and predictability is important, because it offers management 
a chance to influence the grapevine. What are some of these causes? For 
one thing, we know that any group tends to be most active on the grape- 
vine during periods of excitement and insecurity. Examples are a layoff 
or the installation of automation in the office. At times like this, the grape- 
vine is a beehive of activity, which means that you must watch it with extra 
care and "feed" it the right information to keep it from getting out of 


People also are active on the grapevine when their friends and work 
associates are involved. This means that if Mary is to be promoted or 
Beatrice is fired, you better be certain that your employees know the full 
story as soon as possible; because if they are not informed, they will fill 
in the gaps with their own conclusions — and there you have the start of 
another rumor. People also are most active on the grapevine when they 
have news, as distinguished from stale information. Research shows that 
the greatest spread of information happens immediately after it is known; 
so it is important to get out the right story in the beginning. 

The grapevine exists largely by word of mouth and by observation; 
hence, if you have procedures which regularly bring people in contact, you 
can expect that these people have an active grapevine. For example, in one 
company the chief link between two offices was the manager's secretary 
who stopped by the other office right after lunch every day to pick up re- 
ports. In another office, the link was an accounting clerk who every morning 
telephoned 300 yards across the company property to get some cost data. 
In a similar manner, employees having adjacent desks are likely to com- 
municate more than two employees in separate buildings. You, the office 
manager, are partly determining the grapevine by the office layouts and 
procedures which you establish. 

One grapevine characteristic with which we are all familiar is that the 
grapevine carries rumor, which is defined as untrue grapevine information. 
Some persons look upon the grapevine as nothing but a rumor-manufac- 
turing machine. However, my research in business suggests that we greatly 
overplay the rumor aspects of the grapevine. We remember the few times 
it brings us rumors but forget the many times it brings us the straight facts 
— which leads us to the erroneous conclusion that the grapevine carries 
mostly rumors. Actually, the reverse is true. If we took a cross-section of the 
grapevine, we would see that much more than 50 per cent of its information 
is correct. Though I do not have enough cases to offer you statistically 
reliable figures, my research indicates that in normal business situations 
between 90 per cent and 95 per cent of grapevine information is correct. 
Occasionally the grapevine has the correct information even when the boss 
does not. In one company, for example, an office supervisor learned by the 
grapevine that his job was to be abolished. He did not believe it, but he 
later learned it was true. In another company a field salesman learned of 
his transfer from a friend who was in the real estate business. The real 
estate man knew the information because the new salesman's wife had 
contacted him seeking a new house in the community. 

Another characteristic of the grapevine which we all talk about is that 
the grapevine can be quite fast. Research confirms this point. The cluster 
chain makes it easy for a few people to reach many others in a short time. 
Furthermore, with modern aircraft travel and electronic communication, 
it is possible for the grapevine to leap hundreds of miles quickly. To take 
an example, a man we shall call Joe Smith worked for a manufacturing 


company, but was on a year's leave of absence in Florida. One day, in the 
home office up north, a company official came into the president's office 
and said that he had heard that Joe was quitting to go with another com- 
pany. "You must be wrong," said the president. "I talked to Joe long dis- 
tance day before yesterday, and he said he would be back on the first of the 

At that point the president's secretary brought in the morning mail. 
Right on top was a special delivery letter from Joe Smith submitting his 
resignation to take a job with a rival company. Investigation disclosed 
that Joe had happened to meet an out-of-town friend just after he made 
his sudden decision to resign. He told his friend, who called home and told 
his wife that night — and the grapevine was underway! 

Benefits of the Grapevine 

One fact which research has disclosed is that the grapevine provides a 
number of benefits and that many managers either intuitively or purposely 
already make use of these benefits. As mentioned earlier, the grapevine is 
a primary means for development of group identification and interest in 
work. It also helps the company complete its communication job. Probably 
most employees get as much company information by way of the informal 
grapevine as by formal communication. In fact, it would be almost impos- 
sible for management to transmit formally all the variety of company in- 
formation which is necessary to help employees feel a part of the company. 
They depend on the grapevine to help them understand their environment. 

Some managers use the grapevine additionally as a tactical maneuver. 
This is a common device in collective bargaining. As an example, one 
company reached a stalemate with its union; and in order to hurry along 
negotiations, it had one of its representatives drop the rumor that the 
company's wage offer would be withdrawn at the end of the week if the 
union continued to ignore it. Needless to say, this word reached the union 
quickly and the parties were back at the bargaining table the next day. (I 
might add that the union makes good use of this tactical device, too.) 

The grapevine is also a primary source of upward communication, espe- 
cially information about what people are doing and how they feel toward 
certain situations. The grapevine brings to a manager both facts and feel- 
ings, rumor and truth, and it is his job to sort and interpret them. Another 
grapevine benefit is that it is probably the best emotional safety valve yet 
devised. When Mary gets irked at you, the office manager, she isn't likely 
to tell you; but she needs to tell someone in order to get the problem off 
her mind. 

Situations such as I have mentioned prove that the grapevine has many 
useful functions around the office. Given the proper environment it can 
"earn its board and keep." Though it is a problem, it is not by any means 
all bad. 


Using the Grapevine Constructively 

By this point in our discussion, we have recognized at least three major 

1. The grapevine is here to stay. 

2. It is a normal part of our organization. 

3. It offers us some benefits. 

If we accept these ideas, then straight thinking dictates that we should 
learn to live with the grapevine. It can help us especially if we will give 
it some guidance. That is a large order, but we know we must fulfill it 
because the grapevine is roughly one-half of our communication system. 
We can no more ignore it than we can ignore one-half our markets or 
one-half our company policies. Our first step in living with the grapevine, 
therefore, is to become aware of it. It is a part of our decision-making 
environment. We must regularly ask ourselves: How will this action affect 
the grapevine? What precautions do I need to take? Can the grapevine help 
implement this action? 

Our next step is to learn something about the grapevine so that we will 
know how to deal with it. If we are professional managers, we will try to 
prepare ourselves professionally. Most of all, study your own company so 
that you can get some feel of the channels of communication and the role 
which the grapevine plays. If possible, support research on the subject or 
do your own research, because you will find minimum coverage of this 
subject in the professional literature. 

Third, tune in to the grapevine. Listen and learn. Actually, there is not 
one grapevine, but rather there are hundreds passing back and forth around 
you every day. What are the management grapevines saying? The union 
grapevines? The employee grapevines? But a word of caution is in order 
here. You have to sift and interpret what you hear on the grapevine. Your 
job is to look for the meaning not merely the words. To illustrate, a man 
we shall call Jones supervised nine claim adjusters in an insurance office. 
Jones tried to listen to the grapevine and one of the messages that came 
through was, "Your men don't feel busy enough; they want more work to 
do." Jones knew that each man had an adequate work load; so he finally 
concluded that the grapevine had garbled the statement before it reached 

Investigation disclosed that Jones heard right but made a wrong inter- 
pretation. He took the words at face value instead of relating them to the 
people who stated them. These men felt that one or two of Jones' favorites 
were getting all the large claim adjustments which carried more prestige; 
therefore, his men really wanted fairer work assignments but not more 
work. Then why didn't they say so? Evidence was that they would not dare 
ask directly for fairer assignments for three reasons: (1) action of this type 


would be openly charging Jones with favoritism, (2) it would be openly 
taking prestige cases away from fellow workers, which might create internal 
conflict, and (3) prestige was a measure of employee "feeling" about claims, 
and management gave no recognition to this aspect of claims. Having these 
good reasons, the men asked for "more work" hoping that with the extra 
work they would get more prestige cases or that Jones would finally per- 
ceive what they wanted. The conclusion which we may draw from this ex- 
ample is that we should listen to the meaning which the grapevine conveys 
rather than to the words it uses. 

A fourth step in living with the grapevine is to discover its leaders and 
work with them when the occasion demands. All of us take part in grape- 
vines, but there are some thought leaders who generally mold the group's 
opinions. These are the grapevine leaders of which I speak. If, for example, 
some complicated organizational changes are being made and you know 
that your people still do not understand them even after you have tried to 
explain them, perhaps you should solicit the support of one of your key 
men in the informal organization. Maybe he can help reinterpret your 
ideas through the grapevine in terms which make more sense to workers. 
Of course, you may not formally ask this man to help you, but you try to 
make sure that he does understand the changes and feels free to convey 
them to others. This kind of approach works only if the thought leader 
has a favorable attitude toward the company; so you should do all in your 
power to cultivate cooperative attitudes among the informal thought lead- 
ers in your office. It is useless to try to ignore these thought leaders, because 
to do so is simply to bury your head in the sand like an ostrich. They are 
there, and they will influence people's reactions to what management does. 

A fifth step in working with the grapevine is to feed it facts so that it 
will have something useful to carry. The grapevine is as active and restless 
as waves on a seashore. Minute by minute, hour by hour, as people contact 
each other throughout your office, the grapevine is operating. Here is tre- 
mendous capacity for carrying information. Whether what is carried is 
useful or useless depends considerably on what you do. You can keep news 
bottled up in your executive ranks, in which case the grapevine carries 
much useless speculation about company activities because employees do 
not know the real facts. Or, you can take the better approach and com- 
municate what the workers want and need to know about the company so 
that some grapevine energies can be devoted to carrying and interpreting 
these company facts. In other words, feed and water the grapevine. Supply 
it with useful facts today so that you do not harvest sour grapes tomorrow. 
Help the grapevine be usefully productive. 

Now for a word or two about rumor. Learning to live with the grape- 
vine means that we must know how to deal with rumor. My opinion is that 
we should strike back at it firmly and consistently. But we should know 
how and what to strike. It is a serious mistake to strike at the grapevine as 
a whole merely because it happens to be the agent which carries rumor. 


That approach is somewhat the equivalent of doing away with people be- 
cause they transmit diseases to each other. 

Rumor arises from a number of reasons. One cause is plain malicious- 
ness, but it is probably not the main one. A more important cause is em- 
ployee anxiety and insecurity. When people are poorly placed, emotionally 
maladjusted, or inadequately informed about their environment, they often 
react by circulating rumor. This is a normal human effort to make their 
situation more meaningful and secure. On other occasions, rumor is means 
of wish fulfillment and/or pressure upon management. For example, Mary 
and Joan start a rumor that everyone in the office will get a $20 monthly 
raise. Saying this makes them feel better, and they hope if it is said long 
and loud enough maybe it will come to pass. Employees are wise and they 
sometimes use rumor as a tactical maneuver. Given the proper situation 
of poor employee communication, they plant an undesirable rumor in 
order to smoke out the true facts from a reluctant management. In this 
case, management has mostly itself to blame because it failed to provide 
the facts on time or to explain why it could not provide them. 

If we are going to strike back at rumor, our best approach is to get at its 
causes rather than try to kill it after it has already started. Let's show that 
we are topnotch professional managers by practicing preventive medicine. 
My opinion is that a well-managed office has very little rumor mongering, 
for the simple reason that people have little cause to start rumors. All of 
us have seen offices and shops like this. When each worker feels reasonably 
secure, feels on the team, and understands the things that matter to him, 
there are few rumors. 

But in spite of all you can do, rumors do start. Then what? In general, 
try to stop the ones that are important enough to be of concern. Stop them 
as early as possible because research shows that once a rumor's general 
theme is known and accepted, then employees distort future happenings 
to conform to the rumor. Thus, if employees accept the "scuttlebutt" that 
you are planning to move your offices to a new building, then every minor 
change thereafter will be interpreted as a confirmation of that rumor. If 
the rumor were dead, these same changes could be made without any em- 
ployee upset at all. 

It seems to me that a firm's communication policy should distinguish 
between two types of rumors. It is a waste of time to strike at all rumors, 
and to do so makes a "mountain out of a molehill." However, company 
policy should make it clear that employees are not to spread so-called 
"subversive" rumors — those which tend to seriously reduce morale, destroy 
teamwork, decrease productivity, or maliciously attack a person's dignity 
and integrity. This type of rumor can do more harm than can damage to a 
machine, and it should be considered when employees are rated or screened 
for promotion. 

Rumors are stopped by means of public-address-system announcements, 
rumor columns in plant newspapers, bulletins, and so on; but the most 


effective method is face-to-face supply of the facts by each manager. One 
word of warning is in order. Give the facts directly without first mention- 
ing the rumor, because research suggests that when a rumor is repeated 
at this time, it is remembered just as well as the refutation! 

Regardless of a rumor's importance, managers should listen to it care- 
fully, because — even though untrue — it usually carries a message. Each 
manager should ask himself: Why did that rumor originate? What does 
it mean? In every case, there is some cause which the manager needs to 
understand. If, for example, the grapevine is saying that the only meat 
available in the cafeteria all next week will be wieners, it may mean that 
too many wieners are being served, or that the cafeteria's wieners are 
wonderful, or that Friday fish day is not adequately respected, or some- 
thing else, or nothing at all. The manager's job is to try to take meaning 
from the hodge-podge of rumors as they pass by. Maybe this approach is 
unrealistic for some managers or for everyday usage, but occasionally man- 
agers with keen insight have made valuable interpretations from rumors 
on the grapevine. May I illustrate with the case of the labor relations 
director who during a strike listened carefully to what the workers said 
management was going to do. He knew these were rumors because manage- 
ment had not decided what to do, but he listened nevertheless because 
these rumors gave him insight about worker attitudes toward management 
and about how far the workers would go. 

I have been talking about how to live with the grapevine, and my seventh 
and final point is to train your managers and supervisors in grapevine com- 
munication just as much as you train them in formal communication. Most 
of the communication training programs I have seen in business give very 
little attention to informal communication. This is a serious oversight 
which needs correction. Apparently it is assumed that managers already 
know how to deal with the grapevine, hence they should be trained mainly 
in formal communication; but I suspect the reverse is more accurate. At any 
rate, training about grapevine communication is badly needed. Improve- 
ment in employee communication is going to be slow until our managers 
learn more about how to make constructive use of the grapevine. 

In summary, I have made four points which I urge you to consider care- 

1. The grapevine is here to stay. 

2. It is a normal group activity. 

3. We can make constructive use of it because it is not all bad. 

4. To make better use of it, we need to give our managers more training in in- 
formal communication. 


Requirements and Measures of Management 

The success of business management is a function of the nature of the 
leadership exercised in the organization. In establishing the ideal organ- 
izational structure, the personal characteristics of the leader are in part 
ignored. Yet, in actual practice, executive personalities do influence the 
real nature of the organization. Thus, the characteristics of the individual 
leader bear examination. 

It appears that the leader may possess certain personal traits and skills, 
inherited or acquired. Gardner contrasts traits found in successful and 
unsuccessful executives as borne out by tests on business executives. On 
the other hand, Katz emphasizes that the selection of candidates for execu- 
tive training must be based on skills which they exhibit in carrying out 
their jobs rather than on innate traits and characteristics. Nonetheless, the 
measures of management can no more depend upon the presence or ab- 
sence of desirable skills or traits than upon the application of good prin- 
ciples of management, per se. Standards of performance must reflect the 
attainment of individual and organizational goals. 

The measurement of management performance is characterized today 
by a variety of standards. In many instances, if the organization is oper- 
ating "in the black," or if profit percentages are comparable with past 
ratios, managerial performance is considered effective. In such cases, atten- 
tion may be directed toward only minimal attainment rather than toward 
continual improvement. 

An additional facet of the problem stems from the fractionalization and 
diffusion of authority within the typical organization. Measurement is 
confounded by the need for interpreting the raison d'etre of the group 
in terms of individual and departmental performance as well as by the 
presence of multiple, rather than singular, objectives. Thus, a real problem 
facing management is the establishment of standards which will make pos- 
sible effective evaluation of a dynamic and self-critical nature. 

As with most of the other areas of management, a greater refinement of 
existing techniques is required. In the light of current concepts and knowl- 
edge, the following articles deserve particular attention. Carroll offers an 



interesting concept, the "work-added" or conversion-cost approach. Mar- 
tindell suggests a preliminary evaluation on ten major points for the entire 
industry, and then a comparison of the management of a particular com- 
pany to the general industry yardstick. 

Abilities and Skills of Effective Managers 



In choosing younger men for promotion into the executive ranks, how 
can the potentially successful executive be recognized in advance? 

Many executives have found that persons of high intelligence and prac- 
tical competency often turn out to be ineffective when placed in positions 
of increased responsibility. It is not that these persons do not know the 
business or lack the technical skills. It is rather in the area of their relations 
with others on the job and their behavior within an organization that the 
real difficulty is found. 

Research done on the problem of executive selection has lately developed 
the reasons for such failure. Techniques validated at Harvard University 
and fashioned into workable tests at the University of Chicago, have given 
us the answers. It is known how to uncover such failures now — in advance 
— and how to prevent them. 

Application of these tests among business enterprises 1 now show (1) that 
it is not only possible but practical to test junior executives in quick form 
and determine in advance whether they have the stuff of which successful 
business executives are made, and (2) that the characteristics of the success- 
ful, practicing executives — as well as the unsuccessful variety — can be desig- 
nated clearly. 

From the extensive testing done with junior and senior executives, it 
is now clear that successful business executives have many personality 
"traits" in common. So have the unsuccessful ones. 

Despite the differences among men, the common personality structure 
of the successful executive has the following eleven "traits," all of which 
can now be spotted in advance by the newer tests. The unsuccessful execu- 
tives have twelve "traits," any combination of which is usually sufficient to 
undermine a business career. 

* Burleigh B. Gardner, "What Makes Successful and Unsuccessful Executives?" Ad- 
vanced Management, Vol. XIII, No. 3 (September, 1948), pp. 116-124. 

l Comprising 473 executives from fourteen firms in the following fields: durable and 
consumer goods production, retail and wholesale distribution, transportation, advertising 
— with outlets, plants or offices in every section of the United States. 


Turning to the successful executives first, we may designate their "traits." 

1. Achievement desires. The pleasure of accomplishment is a potent 
drive among able executives. They must accomplish and achieve in order 
to be happy. In some personalities, however, there is a sort of false-face 
achievement drive which is different from the genuine article. This sort of 
person hankers for glory and looks to the future in terms of the glory it 
will shower upon him. 

That is different from the achievement drive of the successful executive, 
who is motivated more by the sheer accomplishment of the work itself. It is 
not that the successful executives do not want more income or increased 
prestige. Far more real to them, however, is the continual stimulation 
which arises from the immediate tasks well done. It is that passion for 
achievement, more than anything else, which animates the successful execu- 

2. The idea of authority. The successful executive's idea of authority 
is that it does not hamper, inhibit or constrain him; he accepts it without 
resentment. He looks to his superiors as persons of greater training and 
experience whom he can consult on problems and who issue guiding direc- 
tives to him which he accepts without prejudice. This is a most necessary 
attitude for the successful executives, since it controls their reaction to 

Executives who view their superiors as prohibiting forces have trouble 
working within an organization. Unconsciously, they resist superiors, or do 
things to obstruct the work of their bosses, or, finally, they may assert their 
independence unnecessarily. 

A young man was accepted for a junior executive training position. He 
had fine qualifications, good college training, excellent appearance and 
poise, and agile mental abilities. The psychological analysis detected only 
one potential source of real difficulty — his concept of authority. He saw his 
associates as competitive persons whom he must outwit. He had no clear- 
cut image of superiors as guiding or directing figures. Hence it was pre- 
dicted that he would soon get into difficulty with his associates and su- 
periors. For about two weeks none of these symptoms appeared. Then his 
associates began to complain to their department head that this man was 
being overly critical and cutting in on their work. Soon after, the young 
man himself began to be increasingly difficult to direct; he became more 
resistant to suggestions about his work. Finally, the company was forced 
to release him. 

A middle-aged man who had been with one company for about two 
years had requested a transfer to another department. He had been placed 
in several positions in various departments of the company. In each of 
these he had done reasonably good work and there had been no outstand- 
ing complaints about him. His name had come up for promotion several 
times, but somehow he never was promoted. He was tested when he had 
requested another transfer and the test analyses — made before any of the 


above history was known — showed him to be a man of good though not 
outstanding abilities, and able intellectually to cope with most intermedi- 
ate level positions. His concept of authority, however, placed him at the 
top; unconsciously he felt himself to be better than most of his superiors. 
When this finding was presented to the man's superiors, they were able to 
substantiate it completely. They cited instance after instance in which the 
man acted as if he were doing the company a favor by working there. In 
short, the subordinate's idea of authority made it difficult for him to take 
orders and operate successfully within the organization. 

3. Strong mobility drives. Successful executives have strong drives to- 
ward achievement, material rewards and prestige — in that order. Material 
rewards and prestige will keep the individual working with zeal equal to 
that aroused by a desire for achievement. But the particular kind of work 
and position which will interest men will differ with the nature of their 
mobility drives. The successful executive's drive, however, is always first 
aimed at achievement. 

The different motivations behind an individual's drive can be of con- 
siderable importance in determining his placement. 

In one company two men were being considered for a special training. 
This job involved working in all areas of a new section of the business and 
eventually assuming a responsible position within it. For the year's train- 
ing, however, the two men were to have no special titles or responsibilities 
other than learning all the angles of the business. The psychological analy- 
sis suggested that one of these men would adapt readily to this situation 
while the second would not. The report on the first man emphasized that 
he was primarily interested in work, accomplishment and new ideas; that 
therefore this new training situation would be accepted as an exciting 
challenge. The second man, however, seemed far more concerned about 
the outward symbols of a good job than he was about work accomplishment 
or learning new things. His title was quite important to him. He had let 
it be known in his community that he was an "Assistant Director" in an 
important business. He liked his private office with a secretary outside. He 
was a good worker, had above average abilities, but tests showed he derived 
more satisfaction from the social implications than from the work. There- 
fore this new job was reported by the psychologist to be quite a threat. The 
man would have no title, give up his office, would be just a "learner." Both 
men were put on this training job. As predicted, the first man went at it 
enthusiastically and thoroughly satisfied his superiors with the rapidity 
with which he learned the new procedures and adapted to the new situa- 
tions. The second man, however, soon began to display symptoms of dis- 
satisfaction. He could not seem to learn the new precedures, he criticized 
unnecessarily, he showed no enthusiasm for finding out new things. His 
mobility drive, unfortunately, was in the wrong gear, and he soon failed. 

4. Organizational ability. The ability to bring order out of chaos is 
another characteristic of successful executives. All of them, moreover, have 


the ability to take seemingly isolated events or facts and see relationships 
that may tie them together. In short, they can organize efficiently. Further, 
they are interested in looking into the future and are concerned with pre- 
dicting the outcome of their decisions and actions. 

5. Decisiveness. The characteristic of decisiveness does not mean that 
an executive must make quick and final decisions in rapid fire succession, 
although some do. More crucial is the ability to come to a decision among 
several alternative courses of action — whether it be done on the spot or 
after detailed consideration. Very seldom does this ability break down. 
While less competent and well organized individuals may become flustered 
and operate inefficiently in certain spots, most of the successful men force 
their way to a conclusion. Nothing is too difficult for them to tackle and 
try to solve. 

6. Firmness of conviction. One way of differentiating between people 
is in the relative strength or weakness of their notions of self-identity. Some 
persons lack definiteness and are easily influenced by outside pressures. 
Some, such as successful executives, are firm and well defined in their sense 
of self-identification. They know what they are and what they want, and 
they have well developed techniques for getting what they want within the 
framework of their desires and within the often narrow possibilities of 
their own organizations. 

7. Activity and aggression. Successful men have a constant drive to be 
moving and doing. The executive is essentially an active, striving and 
aggressive person, although not necessarily so outside of business. This 
activity and aggressiveness are always well channelized into work or strug- 
gles for status and prestige. There is a constant need to keep moving, to do 
something, to be active. 

This does not mean that they are always in bodily movement or moving 
physically from place to place (though this is often true), but rather that 
they are mentally and emotionally alert and active. This constant motivator 
unfortunately cannot be shut off. It may explain why so many executives 
find themselves unable to take leisurely vacations or to stop worrying 
about already solved problems. A possible contributory fact is seen in the 
following point. 

8. The need to overcome a sense of frustration. Successful executives 
have a pervasive fear of failure. If one is continually active, always making 
decisions and grappling with problems, any inability to do so successfully 
may well result in feelings of frustration. This seems to be true of execu- 
tives. In spite of their firmness of character and their drive to activity, they 
also harbor a rather pervasive feeling that they may not really succeed 
and be able to do the things they want. 

9. Realism. As opposed to those who may be over-idealistic and lack 
practical sense, successful executives are strongly aware of immediate reali- 
ties and their implications. They keep their feet on the ground. They are 
interested in the practical, the immediate and the direct. Their inclina- 


tion is to grapple with the realities in a forthright and energetic manner. 
However, a too strong reality sense that does not find the realities in 
tune with the individual's ambition may well leave a further sense of 
frustration and of the unpleasantness of reality. This happens to many 
executives who find progress and promotion too slow for their drives. The 
result is often a restlessness rather than activity, a fidgetiness rather than 
a well channelized aggression, and a lack of ease that may well disrupt 
many of their usual personal relationships. 

10. Relations with others. In general, the mobile and successful execu- 
tive looks to his superiors with a feeling of personal attachment and tends 
to identify himself with them. His superiors represent for him a symbol of 
his own achievement and activity desires and the successful junior tends 
to identify himself with these traits in those who have achieved more. He 
thus is responsive to his superiors, the nature of this responsiveness of course 
depending on his idea of authority, and the extent to which his sense of 
frustration is present. 

On the other hand, he looks to his subordinates in an essentially im- 
personal way, seeing them as "doers of work" rather than as people. This 
does not mean he is cold and treats them casually. In fact, he tends to be 
rather sympathetic with their problems. But he still treats them imper- 
sonally, with no real or deep interest in them as persons. It is almost as 
though he viewed his subordinates as representatives of things he has left 
behind, both factually and emotionally. The only direction of his emo- 
tional energy that is real to him is upward and toward the symbols of that 
upward interest, his superiors. 

11. Attitude toward parents. In a sense, the successful executive is a 
"man who has left home." He feels and acts as though he were on his own, 
as though his emotional ties and obligations to his parents were severed. 
It seems most crucial that he has not in addition retained resentment of his 
parents, but has rather simply broken their emotional hold on him and 
been left psychologically free to make his own decisions. 

A man in his early thirties and employed in a branch of a company, was 
being considered for transfer to the central office in another state. He was 
working satisfactorily in his present post. The tests showed his excellent 
abilities, but also his strong emotional ties to his parents which were bind- 
ing and clearly limited his emotional freedom. In the new job situation, it 
was felt this would be a distinct handicap and would put too low a ceiling 
on his potential promotability. These dependent attitudes had not pre- 
viously been apparent. He was again interviewed and directly asked if he 
would care to accept the job at the central office. He replied that it might 
be fine but first he would have to take a few days off to go home and consult 
his parents. He explained that he did not like to make such decisions with- 
out his parents' agreement! Further interviewing disclosed that his parents 
were not financially dependent upon him and that the restriction was 
solely emotional. He had not lived at home for some time, but in his pre- 


vious job he had always consulted his parents upon any change of work 
and followed their advice. It was finally decided that if this man could not 
make decisions on his own life, he would not be potential executive mate- 
rial. He wasn't. 

Test findings indicate clearly that those who have not broken this tie 
to their parents are either too dependent upon their superiors in the work 
situation or are too resentful of their superiors, depending upon whether 
they have retained their dependency parental ties or whether they are 
still actively fighting against them. 

In general, the relationship to the mother has been the most clearly 
broken tie. The tie to the father remains positive in the sense that the 
father is viewed as a helpful but not restraining figure. Those men who 
still feel a strong emotional tie — far more than mere affection — to the 
mother have systematically had difficulty in the business situation. This 
youthful emotional tie seems to interfere with the mature attitude of 
activity, progress, and channelized aggression. The tie to the father, how- 
ever, must remain positive — as the emotional counterpart of the admired 
and more successful figure. Without this image, struggle for success seems 

A happy relationship with the father makes it easier for the executive 
to work within the framework of a large organization with its already 
established and operative set of over-all goals and procedures. Those ex- 
ecutives whose self-assertion is stronger and who unconsciously yearn for 
complete independence — that is, are still fighting the father — will find 
it impossible to work within a framework of company policy established 
by superiors. Their feelings of loyalty are to themselves rather than to 
company policy which is the impersonal counterpart of the father-image. 

Clearly, there are situations in which the independent, self-assertive 
person is of great value. But he should be distinguished in advance and 
placed only in such situations where these traits are of value. 

One man referred for testing had most excellent recommendations and 
had been a responsible army officer during the war. The test analyses 
showed outstanding abilities, decisiveness, excellent organizational capac- 
ities and a concept of clear-cut future goals. He was not recommended for 
employment, however, on the basis of one feature of his test performance. 
The psychologists found clear attitudes of extreme self-assertion and a dis- 
like of cooperative action. Unconsciously, he viewed himself as a lone wolf 
operating aggressively on his own behalf. The organization considering 
hiring him was an established one with a long history of successful business 
procedures. Individual success within it depended upon the policy of co- 
operative action with associates and a kindly but directive attitude toward 
subordinates, as well as upon an adoption of the company's over-all ob- 
jectives. The ex-army officer was a man with no concept of a superior's 
views or of coordinate action with others. He was therefore not recom- 
mended. This finding, however, seemed to contradict his excellent 


recommendations and his army record. It was therefore decided to inter- 
view the people who had written his recommendation letters. In these 
interviews, it was found that his abilities as predicted were indeed ex- 
cellent. No one questioned his capacities or his work excellence but no one 
could get along with him. His former employers reported that they had 
to let him go because he could never work with his associates. His idea 
had to be accepted completely or not at all. Had he been the boss of the 
entire organization, he might have done well. But in any other position, he 
would resist cooperative action and become dissatisfied himself. 

These eleven traits of successful executives are all intertwined. Various 
traits are or may be dominant over others; but they are all present in vary- 
ing degrees in efficient business managers. 


What about the unsuccessful executives? The failure of some business 
executives has been ascribed to laziness, overwork, stupidity, drinking too 
much, dishonesty, unfriendliness, inability "to handle" people, impudence 
and many other things. All these and many other descriptive words apply, 
but they do not help in understanding the basic reasons why some high- 
placed executives act in such fashions. 

Research into the personalities of executives, successful and unsuccessful, 
reveals that the outward behavior which leads to incompetence, resigna- 
tion or discharge, is often an end-product and that the raw material of 
failure lies buried in emotions and attitudes. Unfortunately, most of these 
matters cannot be voluntarily controlled. Among the more basic liabilities 
of unsuccessful executives are these twelve traits: 

1. The inability to see the forest. The intelligence test records of success- 
ful executives have been known to fall below the scorable level while many 
unsuccessful men have respectable I. Q.'s. The effectiveness and appro- 
priateness of a man's ability, however, is more important than the I.Q. 
score. What is required in executives is the ability to grasp broad prob- 
lems, weigh alternate courses of action and then choose one course to act 
act upon. This presupposes the ability to see the forest and the paths 
through the forest, despite the trees. 

A detailed-minded person is often a practical, realistic man who is con- 
cerned with individual trees. Many such men are considered for promotion 
into executive ranks on the basis of excellent work in supervisory or de- 
partmental functions. If the man's organizing ability is realy limited to 
concrete factors and details, however, it is unlikely that he will perform in 
an equally competent way at an executive level where his vision must be 

Though he is an excellent accountant, he may be mediocre as a company 
treasurer. He may be an efficient traffic manager; it does not follow that he 
can handle the broader problems of a railroad. 

More serious lack of ability often occurs when a man's interest in details 


and concrete factors is so strong that he cannot even grasp the over-all 
problem, to say nothing of dealing with it. In those cases he may never ac- 
complish even the immediate goal and will make expensive oversights and 

The executive in charge of a technical function of a large factory was 
increasingly inactive, letting his responsibilities carry themselves or be 
discharged by assistants without supervision. His interest and ability were 
completely oriented toward accurate and neat paperwork and he was 
relatively unaware of the broader problems that were, according to his 
superiors, the most important part of his position. When war work was 
over and he had to grapple with civilian production and evaluate com- 
petitive practices and models, he was lost. The whole basic problem of 
coping with competition left him bewildered. His records were beauti- 
fully kept, however. 

2. Failure to carry responsibilities. As one goes up the scale of execu- 
tive functions, the increase in responsibility and the reliance on initiative 
and self-control are marked. At the lower levels, there are few alternatives 
to the job; it is done in a specific way and usually at specific times. At ex- 
ecutive levels, the situation is different. There are always alternative 
actions; timing is something to be planned and calculated. Even the goals 
may be undetermined. The executive responsibility is to deal with such 

The way in which the executive regards his responsibility is therefore 
an important one and failure to accept responsibility is a frequent cause 
of failure. In periods of expansion, especially, men may be quickly up- 
graded without insight into their capabilities of assuming responsibilities 
and, hence, with undesirable results in some cases. 

"One man is a problem to me, and I can't quite lay my finger on it. He 
does what he is told to do, and does it carefully. He never makes any par- 
ticular mistakes, but somehow he doesn't seem to have any particular in- 
terest in his job. Not that he's bored — but he never does anything unless 
he's told to do it. I don't have time to tell him everything and to follow 
his work." Tests revealed the difficulty. The subject felt no particular 
responsibility for what happened; the world was a lot simpler if he 
minded his own business and did just what he was told. He was not de- 
pressed or poorly adjusted; his attitude toward life was one of taking what 
came along and not worrying about changing things or starting innova- 
tions. As an executive, he was a failure for that reason. As an assistant, al- 
ways working on exact instructions, he vould have been successful. 

3. Unconscious desire to be something else. If a man does not find satis- 
faction in working at a particular job, or in working for a specific company, 
it is almost inevitable that the quality of his work will fall below his best 
level. Yet often this lack of interest in his job cannot be controlled at will 
despite goading or lectures. This distaste may be offset for some time by re- 
wards, promise of promotion, or praise but such incentives work only on 


short-term discomforts. Such over-praised techniques cannot be relied upon 
to sustain persistent and abiding effort. 

It is a common technique to exhort such people "to settle down," rec- 
ognize their responsibilities and grasp their opportunities. But such moral- 
izings almost invariably fail because the lack of interest cannot be volun- 
tarily controlled. The basic urges lie in directions other than executive 
roles but the executive himself rarely realizes this and even more rarely 
can he articulate the reasons for his unhappiness or failure in his present 

A bright young man was extensively trained by his company for which 
he had been a foreman. His subsequent record with them as a departmental 
supervisor was poor. He was markedly inadequate in his executive role, 
despite his high I.Q., good capacities, practical experience and pleasant 
cooperation. Tests revealed that he was not really interested in his work and 
subconsciously wanted to leave it. His honest efforts to force himself, out 
of gratitude, were of little avail. He was not basically ambitious for broad, 
executive responsibility; he wasn't, however, so un-American as to refuse a 
chance for education and advancement. It was recommended that he be 
tried out in a department where he could do skilled, non-executive work. 
It seemed most likely that he would eventually leave, to pursue the artistic 
career he found stimulating. 

4. Unconscious desire to be someone else. An unsuccessful plant super- 
intendent was irritated by the long working day (which interfered with 
cocktails), the profane, incorrect language of subordinates, and the general 
dirt and grime of his surroundings. Once of a leisurely, wealthy family, 
he was interested in earning money only to regain his formal, social status 
and ease. 

A young graduate was outstanding enough to gain the interest of his 
college president and was hired by a large company for his enthusiastic 
references. He was an unsatisfactory junior employee since he was pre- 
occupied with circumventing his superior and with telling highly im- 
probable tales of prodigal successes. He did a mediocre job and waited to 
be "discovered." 

These men have in common an intense desire for success which appears 
at first sight to be the drive and ambition characteristic of good executives. 
In the two cases cited, however, the desire for success was a specific and 
self-referring goal which was irrelevant to the job and foreign to the goals 
of the company. The goal in each case was a role which the executives 
wanted to play, not because they were fitted for it but because they liked 
themselves in such positions. 

These men will seek and accept responsibility far beyond their exper- 
ience and judgment, unaware of their own deficiences but unconsciously 
determined upon getting to be something which they are not. They do 
not, as a rule, last long in the executive role. 

5. A yen for express trains. In some cases of failure, a man may be 


ambitious for broad executive power and success but so intolerant and 
bored with the intermediate tasks that he never earns success. Local trains 
are always too slow for such people. Many promising young men fail in 
this fashion; they cannot produce responsibly at the levels of routine tasks 
and are never promoted to the positions of general authority dictated by 
their ambitions and potentialities. 

6. Inability to make room for other people. Some executive positions 
are awesome and powerful, permitting considerable antagonism or in- 
difference to others. Most executives, however, must cooperate with their 
associates, must be able to give help and accept advice on mutual prob- 
lems. This is not what is commonly known as the ability "to get along with 
people." It is more closely akin to the ability to accept criticism, or the 
ability not to take umbrage at dissenting points of view. 

The man who cannot do so, often finds his path blocked, or is dismissed 
by observant supervisors who value the welfare of the group and organiza- 

A rising young executive proved his ability by competent work. He 
moved up rapidly for a time, and the continual upgrading itself partly 
served to conceal his antagonism and bitter competition with his associates. 
He was sharply curbed when, after several small incidents, he came to his 
superior demanding that one colleague be fired for insulting him and made 
outrageous attacks on the integrity of other men well known to the gen- 
eral manager. His executive responsibilities consistently narrowed as he 
repeatedly failed to work cooperatively with others. 

Such resentment and indifference to the needs of other men comes from 
a variety of sources. In some cases, it is a carry-over from the role of a fav- 
ored child who always seemed to get the privileges; it may be an arrogance 
which turns into rage at any frustration. This man, in his childish demands, 
illustrates another source of difficulty. 

7. Resistance to authority. The attitudes which an adult has toward 
authority and the emotions aroused by discipline often carry a trace of the 
attitudes of the child toward his parents. Many unsuccessful executives 
fail because, in essence, they cannot accept the direction and supervision 
of another person which makes them feel that they are being pushed around 
and watched like a child. The man described in the last case felt that the 
discipline of the department should be radically changed to accommodate 
his resentments; many employers are familiar with unreasonable demands 
of this sort. 

The man who has never outlived his anger at the way his father threw 
his weight around at home, or forgiven his mother for her plea for more 
filial devotion, frequently shows a rebelliousness against organizational 
authority which is difficult to tolerate. These range from the chronic late 
comer through the man who somehow forgets important meetings and 
messages for his boss to the real problem who demands special privileges 
or ignores directions. 


A competent man was discharged from one position because of "difficul- 
ties" with his superior. A subsequent employer was concerned about his 
tendency to ignore standard procedures in reaching his goals, and to cut 
the corners of established policies. Tests indicated that both complaints 
stemmed from one source: his resentment of authority which has undoubt- 
edly characterized him ever since the time when he was a kindergarten 

8. Arrogance with subordinates. Another area of behavior which re- 
lates to the executive's attitudes toward authority is the way in which he 
uses authority on others. In a position of power over people, traits may 
appear which are apparently in sharp contrast to customary behavior. 
The man of intense ambition is usually conscious of the need to please 
superiors; he may overlook the need to be considerate of subordinates if it 
is not natural to him. 

An executive of considerable authority and long experience became a 
problem to his organization because of his eccentric, demanding super- 
vision. Tests showed that he considered himself far superior to others. His 
subordinates were of no interest to him except as their hard work enhanced 
his reputation up the line. He therefore treated them in a demanding, 
arbitrary way, with the result that his department was full of bitter, dis- 
illusioned people, intent only on moving out, to the detriment of the 

The recognition that supervision plays an important role in company 
morale and is reflected in work quality, turnover, and cooperation has at- 
tracted attention to the attitudes behind the exercise of authority. Study 
of the emotions and feelings of the executive reveals that the difficulty in 
supervising is common. Involved are emotional tendencies which come into 
play and which are not commonly seen in a man's relations with his su- 
periors and associates. 

9. Prejudices which interfere with judgment. A clear-cut ceiling is some- 
times placed on the level of responsibility which an executive can take, 
because of systematic personal bias which leads him always to interpret 
situations in terms of his own fixed ideas about himself and others. Often 
these prejudices come out of his own background and his fixed ideas hobble 
him in dealing with certain types of duties. 

A man who came almost literally from nowhere rose to a position of 
considerable prestige and authority in a large company. It was the impres- 
sion of his superior (corroborated by tests) that, while the executive in 
question could function competently at his present level of controlling a 
factory, his lack of cultural and social sophistication would be a definite 
handicap at higher levels. The difficulty was not that he was unacceptable 
but rather that he felt unacceptable. His grammar, he thought, was not 
of the best, nor his vocabulary, and he was keenly sensitive (had always 
been) to these facts. He was severely critical of people whose backgrounds 
were markedly different from his own, He felt, of course, that they were 


similarly intolerant of him; the net result was that he could not be com- 
fortable, cooperative or productive with them. 

Sometimes, these personal fixed ideas result in a feeling of general sus- 
picion by the executive: his boss is favoring someone else, or his associates 
are out "to get" him, or his subordinates are trying to undermine him. 
These prejudices rapidly undermine a man's efforts and if, by accident, he 
is elevated to higher rank, he may try "to take it out" on his former asso- 
ciates, now his subordinates. The resultant dislocation of effort and conse- 
quent poor morale is evidence of the executive's poor quality in the first 

10. Overemphasis on work. Outside interests and relaxations sustain 
the businessman's energy and balance his activities. Some men live their 
work to an extraordinary extent and regard their families and personal 
lives as expendable, even though pleasant. This channeling of interest is 
often apparent in very successful executives but even so it marks an un- 
balanced situation. Concentration on one avenue of endeavor leads to an 
extraordinary sensitivity to any frustration on the job. This hypersensi- 
tivity almost always leads to trouble if things are not going well. Family 
bickering is a natural result, to say nothing of tense situations at the office. 
In many cases this concentration on work leads to eventual failure. 

Such narrow channeling of energy and drive often arises from a dis- 
ciplined childhood in which the youth was continually required to prove 
his worth and in which little encouragement was given for the enjoyment 
of activities which produced nothing but a pleasurable fatigue. 

The narrow concentration on business may — and often does — result from 
an intense competition in which the man feels that he will outdo his com- 
petitors by concentrating all his energy on success. This latter is character- 
istic of men who were faced with the competition of older children in their 
own families. It may spring from feelings of inadequacy, and real or im- 
agined handicaps in social contacts. At any event, it is debilitating and 

A capable young executive lived his work, postponing or ignoring other 
activities, until he collapsed from fatigue. He resigned abruptly and was 
about to start another job with the same idea of proving himself by exces- 
sive work when he was referred for testing. In a subsequent position he 
was much more relaxed and satisfied, having gained a broader perspective 
on life. Whether this new relaxed mode of operation is permanent remains 
to be seen. 

This problem, again, is one which is often futilely attacked by advice 
from well-meaning superiors, doctors, wives and friends. Since in some 
cases, it arises from intense illogical feelings, it often cannot be voluntarily 

11. Gravitation toward self-destruction. In some cases where failures 
were connected with overwork, the candid observer may note that the ex- 
ecutive "seemed bent on killing himself." That is a subtle and obscure 


cause but it lies on the root of a good number of failures. Some men fear 
success; they will work earnestly for it in accord with their training, de- 
mands of their social group and their family. But when it becomes too 
possible or gets too real they are frightened by the necessity of taking re- 
sponsibility for good work and cut themselves down. 

Many men who fail when given the "big chance" are best described as 
self-punishing. They may have deep, irrational beliefs that they are unfit 
or unable, are selfish, unkind or worthless. Put into a position which de- 
mands that they be adept, responsible, generous, ethical or worthwhile, 
they strive to prove to themselves and the world that they are not so. 

Where these deep, irrational beliefs spring from is sometimes hard to 
determine. Often they come from early family life. Their families expected 
certain norms of behavior or performance from these men as youngsters, 
and they never completely measured up to those family standards. They 
were forced to try but never succeeded. They were continuously goaded on- 
ward, but just missed the goal. More important, however, was the fact that 
they were never praised even for their partial youthful successes. 

Sons of successful fathers who are still on the scene often feel this sub- 
conscious urge for failure. They have been led to believe that they could 
never dome up to their father's stature, and having accepted this all their 
lives, they balk at disproving it by succeeding at their larger tasks. 

Then also, children who are impetuously disciplined and then just as 
impetuously forgiven grow up and unconsciously provoke punishment in 
order to provoke affectionate forgiveness. 

All these cases have a yearning for failure — never articulate, never recog- 
nizable as such, and never clearly evident. But they all may bog down when 
the big opportunity presents itself. 

A generally efficient employee was puzzling and disturbing to his su- 
periors because he could not be counted on to produce well in new situa- 
tions. Usually he handled them well but at times he would fail so com- 
pletely and obviously that considerable damage was done to both his and 
the company's welfare. Praise and encouragement had been generously 
doled out but without any evident effect. Dismissal was being considered 
when tests were made which explained his behavior. He was subconsciously 
convinced of his worthlessness and felt that his success was unearned, a 
product of luck and the more generous people who surrounded him. He 
failed in order "to prove" his incompetence and to provoke the punishment 
which would pay up his debt for their generosity. 

Self-destruction is not always as extreme as in this man; it is often the 
spring that prevents a promising man from fulfilling his potentialities 
through continual little errors or failures that keep his superiors watching 
and "giving him a little more experience and age on his shoulders." Most 
difficult to treat or change because the man is usually unaware of it, self- 
destruction lies behind more failures and self-failures than one usually 


12. Mental ailments. This appears obvious except that in many cases 
the ailment is far from obvious. Executives, like other people, are subject 
to nervous and mental disorders. Sometimes, feelings of inadequacy or 
biased judgment interfere with work long before the appearance of any 
more striking derangement. Sometimes they do not. 

In many cases, the man may work productively and effectively, gaining 
a position of considerable importance before any serious interference arises. 
Such cases may be difficult to recognize, and are often difficult to handle. 

The head of a large technical department was a "reserved" man who 
spoke rarely to people and spent his time alone in his office. Tests revealed 
that he was living in a phantasy world almost exclusively, equally unaware 
of his work and surroundings. Since dismissal would be a catastrophic shock 
to him, it was decided to give him an assistant to take over his functions 
until his family recognized the seriousness of his ill-health. 

Tests were given to an administrative assistant because he forgot so 
many important details and seemed to do increasingly poor work. They 
showed that he was suffering from a serious nervous illness which was con- 
suming his energy and making him sluggish and inattentive. 

An executive was a serious problem because of his irritability and caustic 
tongue. He could not get along with anyone and his superiors tolerated 
him only because he produced high quality work. Tests revealed that his 
personal unhappiness had reached such proportions that he could not con- 
trol himself even though he wished to be liked by his colleagues. He had a 
treatable mental illness but one which would not respond to encourage- 
ment or sympathy alone. 

The most common ailment among unsuccessful executives is a deep and 
abiding depression, common because many of these men believe that they 
are not as productive or admirable or worthwhile as they should be. Most 
people are sensitive to their faults and deficiencies; this is true of successful 
executives also. But the unsuccessful executives, to a large extent, are so 
sensitive to their real or imaginary shortcomings that their sensitiveness 
approaches a paranoidal conviction that they cannot possibly succeed. 

Failure, when it occurs, is, of course, usually the result of a combination 
of the factors named, but it should also be understood that failure as an 
executive is not a broad indictment. Many of these men can and do succeed 
at an equal level — or even higher — in other fields. Many men who fail in 
executive work are capable and effective people who merely have a subcon- 
scious and inarticulate philosophy of life different from the decision-mak- 
ing, action-oriented one of the successful executive. 

They may be and often are interested in technical problems, research, 
the pursuit of ideas, or some autonomous field more than they are inter- 
ested in burden of responsibility and administration which is the most im- 
portant part of the executive function. In other vocations or fields, in 


selling, promotion, technical occupations, and so on, they may make im- 
portant contributions and earn definitive success. But not as a business 


Although the selection and training of good administrators is widely 
recognized as one of American industry's most pressing problems, there is 
surprisingly little agreement among executives or educators on what makes 
a good administrator. The executive development programs of some of the 
nation's leading corporations and colleges reflect a tremendous variation in 

At the root of this difference is industry's search for the traits or attributes 
which will objectively identify the "ideal executive" who is equipped to 
cope effectively with any problem in any organization. As one observer of 
American industry recently noted: 

The assumption that there is an executive type is widely accepted, either openly 
or implicitly. Yet any executive presumably knows that a company needs all kinds 
of managers for different levels of jobs. The qualities most needed by a shop super- 
intendent are likely to be quite opposed to those needed by a coordinating vice 
president of manufacturing. The literature of executive development is loaded 
with efforts to define the qualities needed by executives, and by themselves these 
sound quite rational. Few, for instance, would dispute the fact that a top manager 
needs good judgment, the ability to make decisions, the ability to win respect of 
others, and all the other well-worn phrases any management man could mention. 
But one has only to look at the successful managers in any company to see how 
enormously their particular qualities vary from any ideal list of executive virtues. 1 

Yet this quest for the executive stereotype has become so intense that 
many companies, in concentrating on certain specific traits or qualities, 
stand in danger of losing sight of their real concern: what a man can ac- 

It is the purpose of this article to suggest what may be a more useful 
approach to the selection and development of administrators. This ap- 
proach is based not on what good executives are (their innate traits and 
characteristics), but rather on what they do (the kinds of skills which they 
exhibit in carrying out their jobs effectively). As used here, a skill implies 
an ability which can be developed, not necessarily inborn, and which is 

* Robert L. Katz, "SKILLS of an Effective Administrator," Harvard Business Re- 
view, Vol. XXXIII, No. 1. (January-February, 1955), pp. 33-41. 

l Perrin Stryker, "The Growing Pains of Executive Development," Advanced Man- 
agement (August, 1954), p. 15. Editor's Note: This article is based on a study prepared 
under a grant from the Alfred P. Sloan Foundation. 


manifested in performance, not merely in potential. So the principal cri- 
terion of skillfulness must be effective action under varying conditions. 

This approach suggests that effective administration rests on three basic 
developable skills which obviate the need for identifying specific traits and 
which may provide a useful way of looking at and understanding the ad- 
ministrative process. This approach is the outgrowth of firsthand observa- 
tion of executives at work coupled with study of current field research in 

In the sections which follow, an attempt will be made to define and 
demonstrate what these three skills are; to suggest that the relative im- 
portance of the three skills varies with the level of administrative respon- 
sibility; to present some of the implications of this variation for selection, 
training, and promotion of executives; and to propose ways of developing 
these skills. 


It is assumed here that an administrator is one who (a) directs the activi- 
ties of other persons and (b) undertakes the responsibility for achieving 
certain objectives through these efforts. Within this definition, successful 
administration appears to rest on three basic skills, which we will call tech- 
nical, human, and conceptual. It would be unrealistic to assert that these 
skills are not interrelated, yet there may be real merit in examining each 
one separately, and in developing them independently. 

Technical Skill 

As used here, technical skill implies an understanding of, and proficiency 
in, a specific kind of activity, particularly one involving methods, processes, 
procedures, or techniques. It is relatively easy for us to visualize the techni- 
cal skill of the surgeon, the musician, the accountant, or the engineer when 
each is performing his own special function. Technical skill involves spe- 
cialized knowledge, analytical ability within that specialty, and facility in 
the use of the tools and techniques of the specific discipline. 

Of the three skills described in this article, technical skill is perhaps the 
most familiar because it is the most concrete, and because, in our age of 
specialization, it is the skill required of the greatest number of people. 
Most of our vocational and on-the-job training programs are largely con- 
cerned with developing this specialized technical skill. 

Human Skill 

As used here, human skill is the executive's ability to work effectively as 
a group member and to build cooperative effort within the team he leads. 
As technical skill is primarily concerned with working with "things" (proc- 
esses of physical objects), so human skill is primarily concerned with work- 
ing with people. This skill is demonstrated in the way the individual 


perceives (and recognizes the perceptions of) his superiors, equals, and sub- 
ordinates, and in the way he behaves subsequently. 

The person with highly developed human skill is aware of his own atti- 
tudes, assumptions, and beliefs about other individuals and groups; he is 
able to see the usefulness and limitations of these feelings. By accepting 
the existence of viewpoints, perceptions, and beliefs which are different 
from his own, he is skillful in understanding what others really mean by 
their words and behavior. He is equally skillful in communicating to others, 
in their own contexts, what he means by his behavior. 

Such a person works to create an atmosphere of approval and security in 
which subordinates feel free to express themselves without fear of censure 
or ridicule, by encouraging them to participate in the planning and carry- 
ing out of those things which directly affect them. He is sufficiently sensi- 
tive to the needs and motivations of others in his organization so that he 
can judge the possible reactions to, and outcomes of, various courses of 
action he may undertake. Having this sensitivity, he is able and willing to 
act in a way which takes these perceptions by others into account. 

Real skill in working with others must become a natural, continuous 
activity, since it involves sensitivity not only at times of decision making 
but also in the day-by-day behavior of the individual. Human skill cannot 
be a "sometime thing." Techniques cannot be randomly applied, nor can 
personality traits be put on or removed like an overcoat. Because every- 
thing which an executive says and does (or leaves unsaid or undone) has 
an effect on his associates, his true self will, in time, show through. Thus, 
to be effective, this skill must be naturally developed and unconsciously, as 
well as consistently, demonstrated in the individual's every action. It must 
become an integral part of his whole being. 

Because human skill is so vital a part of everything the administrator 
does, examples of inadequate human skill are easier to describe than are 
highly skillful performances. Perhaps consideration of an actual situation 
would serve to clarify what is involved: 

When a new conveyor unit was installed in a shoe factory where workers 
had previously been free to determine their own work rate, the production 
manager asked the industrial engineer who had designed the conveyor to 
serve as foreman, even though a qualified foreman was available. The 
engineer, who reported directly to the production manager, objected, but 
under pressure he agreed to take the job "until a suitable foreman could be 
found," even though this was a job of lower status than his present one. 
Then the following conversation took place: 

Production Manager: "I've had a lot of experience with conveyors. I want you 
to keep this conveyor going at all times except for rest periods, and I want it going 
at top speed. Get these people thinking in terms of 2 pairs of shoes a minute, 70 
dozen pairs a day, 350 dozen pairs a week. They are all experienced operators on 
their individual jobs, and it's just a matter of getting them to do their jobs in a 
little different way. I want you to make that base rate of 250 dozen pair a week 


work!" [Base rate was established at slightly under 75 per cent of the maximum 
capacity. This base rate was 50 per cent higher than under the old system.] 

Engineer: "If I'm going to be foreman of the conveyor unit, I want to do things 
my way. I've worked on conveyors, and I don't agree with you on first getting 
people used to a conveyor going at top speed. These people have never seen a 
conveyor. You'll scare them. I'd like to run the conveyor at one-third speed for a 
couple of weeks and then gradually increase the speed. 

"I think we should discuss setting the base rate (production quota before in- 
centive bonus) on a daily basis instead of a weekly basis. [Workers had previously 
been paid on a daily straight piecework basis.] 

"I'd also suggest setting a daily base rate at 45 or even 40 dozen pair. You have 
to set a base rate low enough for them to make. Once they know they can make 
the base rate, they will go after the bonus." 

Production Manager: "You do it your way on the speed; but remember it's the 
results that count. On the base rate, I'm not discussing it with you; I'm telling 
you to make the 250 dozen pair a week work. I don't want a daily base rate." 2 

Here is a situation in which the production manager was so preoccupied 
with getting the physical output that he did not pay attention to the peo- 
ple through whom that output had to be achieved. Notice, first, that he 
made the engineer who designed the unit serve as foreman, apparently 
hoping to force the engineer to justify his design by producing the maxi- 
mum output. However, the production manager was oblivious to (a) the 
way the engineer perceived this appointment, as a demotion, and (b) the 
need for the engineer to be able to control the variables if he was to be 
held responsible for output. Instead the production manager imposed a 
production standard and refused any changes in the work situation. 

Moreover, although this was a radically new situation for the operators, 
the production manager expected them to produce immediately at well 
above their previous output — even though the operators had an unfamiliar 
production system to cope with, the operators had never worked together 
as a team before, the operators and their new foreman had never worked 
together before, and the foreman was not in agreement with the produc- 
tion goals or standards. By ignoring all these human factors, the production 
manager not only placed the engineer in an extremely difficult operating 
situation but also, by refusing to allow the engineer to "run his own show," 
discouraged the very assumption of responsibility he had hoped for in 
making the appointment. 

Under these circumstances, it is easy to understand how the relationship 
between these two men rapidly deteriorated, and how production, after 
two months' operation, was at only 125 dozen pairs per week (just 75 per 
cent of what it had been under the old system). 

Conceptual Skill 

As used here, conceptual skill involves the ability to see the enterprise 
as a whole; it includes recognizing how the various functions of the organ- 

2 From a mimeographed case in the files of the Harvard Business School; copy- 
righted by the President and Fellows of Harvard College. 


ization depend on one another, and how changes in any one part affect all 
the others; and it extends to visualizing the relationship of the individual 
business to the industry, the community, and the political, social, and eco- 
nomic forces of the nation as a whole. Recognizing these relationships and 
perceiving the significant elements in any situation, the administrator 
should then be able to act in a way which advances the over-all welfare of 
the total organization. 

Hence, the success of any decision depends on the conceptual skill of 
the people who make the decision and those who put it into action. When, 
for example, an important change in marketing policy is made, it is critical 
that the effects on production, control, finance, research, and the people 
involved be considered. And it remains critical right down to the last ex- 
ecutive who must implement the new policy. If each executive recognizes 
the over-all relationships and significance of the change, he is almost cer- 
tain to be more effective in administering it. Consequently the chances for 
succeeding are greatly increased. 

Not only does the effective coordination of the various parts of the busi- 
ness depend on the conceptual skill of the administrators involve;}, but so 
also does the whole future direction and tone of the organization. The 
attitudes of a top executive color the whole character of the organization's 
response and determine the "corporate personality" which distinguishes 
one company's ways of doing business from another's. These attitudes are 
a reflection of the administrator's conceptual skill (referred to by some as 
his "creative ability") — the way he perceives and responds to the direction 
in which the business should grow, company objectives and policies, and 
stockholders' and employees' interests. 

Conceptual skill, as defined above, is what Chester I. Barnard, former 
president of the New Jersey Bell Telephone Company, implies when he 
says: ". . . the essential aspect of the [executive] process is the sensing of 
the organization as a whole and the total situation relevant to it." 3 Ex- 
amples of inadequate conceptual skill are all around us. Here is one in- 

In a large manufacturing company which had a long tradition of job- 
shop type operations, primary responsibility for production control had 
been left to the foremen and other lower-level supervisors. "Village" type 
operations with small working groups and informal organizations were the 
rule. A heavy influx of orders following World War II tripled the normal 
production requirements and severely taxed the whole manufacturing or- 
ganization. At this point, a new production manager was brought in from 
outside the company, and he established a wide range of controls and 
formalized the entire operating structure. 

As long as the boom demand lasted, the employees made every effort to 

3 Chester I. Barnard, Functions of the Executive (Cambridge: Harvard University 
Press, 1948), p. 235. 


conform with the new procedures and environment. But when demand 
subsided to prewar levels, serious labor relations problems developed, fric- 
tion was high among department heads, and the company found itself 
saddled with a heavy indirect labor cost. Management sought to reinstate 
its old procedures; it fired the production manager and attempted to give 
greater authority to the foremen once again. However, during the four 
years of formalized control, the foremen had grown away from their old 
practices, many had left the company, and adequate replacements had not 
been developed. Without strong foreman leadership, the traditional job- 
shop operations proved costly and inefficient. 

In this instance, when the new production controls and formalized or- 
ganizations were introduced, management did not foresee the consequences 
of this action in the event of a future contraction of business. Later, when 
conditions changed and it was necessary to pare down operations, manage- 
ment was again unable to recognize the implications of its action and re- 
verted to the old procedures, which, under existing circumstances, were 
no longer appropriate. This compounded conceptual inadequacy left the 
company at a serious competitive disadvantage. 

Because a company's over-all success is dependent on its executives' con- 
ceptual skill in establishing and carrying out policy decisions, this skill is 
the unifying, coordinating ingredient of the administrative process, and 
of undeniable over-all importance. 


We may notice that, in a very real sense, conceptual skill embodies con- 
sideration of both the technical and human aspects of the organization. Yet 
the concept of skill, as an ability to translate knowledge into action, should 
enable one to distinguish between the three skills of performing the tech- 
nical activities (technical skill), understanding and motivating individuals 
and groups (human skill), and coordinating and integrating all the activi- 
ties and interests of the organization toward a common objective (con- 
ceptual skill). 

This separation of effective administration into three basic skills is useful 
primarily for purposes of analysis. In practice, these skills are so closely 
interrelated that it is difficult to determine where one ends and another 
begins. However, just because the skills are interrelated does not imply- 
that we cannot get some value from looking at them separately, or by vary- 
ing their emphasis. In playing golf the action of the hands, wrists, hips, 
shoulders, arms, and head are all interrelated; yet in improving one's swing 
it is often valuable to work on one of these elements separately. Also, under 
different playing conditions the relative importance of these elements var- 
ies. Similarly, although all three are of importance at every level of admin- 
istration, the technical, human, and conceptual skills of the administrator 
vary in relative importance at different levels of responsibility. 


At Lower Levels 

Technical skill is responsible for many of the great advances of modern 
industry. It is indispensable to efficient operation. Yet it has greatest im- 
portance at the lower levels of administration. As the administrator moves 
further and further from the actual physical operation, this need for tech- 
nical skill becomes less important, provided he has skilled subordinates 
and can help them solve their own problems. At the top, technical skill may 
be almost nonexistent, and the executive may still be able to perform 
effectively if his human and conceptual skills are highly developed. For 

In one large capital-goods producing company, the controller was called on to 
replace the manufacturing vice president who had been stricken suddenly with 
a severe illness. The controller had no previous production experience, but he had 
been with the company for more than 20 years and knew many of the key produc- 
tion personnel intimately. By setting up an advisory staff, and by delegating an 
unusual amount of authority to his department heads, he was able to devote 
himself to coordination of the various functions. By so doing, he produced a highly 
efficient team. The results were lower costs, greater productivity, and higher morale 
than the production division had ever before experienced. Management had 
gambled that this man's ability to work with people was more important than his 
lack of a technical production background, and the gamble paid off. 

Other examples are evident all around us. We are all familiar with those 
"professional managers" who are becoming the prototypes of our modern 
executive world. These men shift with great ease, and with no apparent 
loss in effectiveness, from one industry to another. Their human and con- 
ceptual skills seem to make up for their unfamiliarity with the new job's 
technical aspects. 

At Every Level 

Human skill, the ability to work with others, is essential to effective 
administration at every level. One recent research study has shown that 
human skill is of paramount importance at the foreman level, pointing out 
that the chief function of the foreman as an administrator is to attain col- 
laboration of people in the work group. 4 Another study reinforces this 
finding and extends it to the middle-management group, adding that the 
administrator should be primarily concerned with facilitating communica- 
tion in the organization. 5 And still another study, concerned primarily with 
top management, underscores the need for self-awareness and sensitivity to 
human relationships by executives at that level. 6 These findings would 

4 A. Zaleznik, Foreman Training in a Growing Enterprise (Boston: Division of Re- 
search, Harvard Business School, 1951). 

5 Harriet O. Ronken and Paul R. Lawrence, Administering Changes (Boston: Divi- 
sion of Research, Harvard Business School, 1952). 

6 Edmund P. Learned, David H. Ulrich, and Donald R. Booz, Executive Action 
(Boston: Division of Research, Harvard Business School, 1950). 


tend to indicate that human skill is of great importance at every adminis- 
trative level, but notice the difference in emphasis. 

Human skill seems to be most important at lower levels, where the num- 
ber of direct contacts between administrators and subordinates is greatest. 
As we go higher and higher in the administrative echelons, the number and 
frequency of these personal contacts decrease, and the need for human skill 
becomes proportionately, although probably not absolutely, less. At the 
same time, conceptual skill becomes increasingly more important with the 
need for policy decisions and broad-scale action. The human skill of deal- 
ing with individuals then becomes subordinate to the conceptual skill of 
integrating group interests and activities into a coordinated whole. 

In fact, a recent research study by Professor Chris Argyris of Yale Uni- 
versity has given us the example of an extremely effective plant manager 
who, although possessing little human skill as defined here, was nonethe- 
less very successful: 

This manager, the head of a largely autonomous division, made his supervisors, 
through the effects of his strong personality and the "pressure" he applied, highly 
dependent on him for most of their "rewards, penalties, authority, perpetuation, 
communication, and identification." 

As a result, the supervisors spent much of their time competing with one another 
for the manager's favor. They told him only the things they thought he wanted to 
hear, and spent much time trying to find out his desires. They depended on him 
to set their objectives and to show them how to reach them. Because the manager 
was inconsistent and unpredictable in his behavior, the supervisors were insecure 
and continually engaged in interdepartmental squabbles which they tried to keep 
hidden from the manager. 

Clearly, human skill as defined here, was lacking. Yet, by the evaluation of his 
superiors and by his results in increasing efficiency and raising profits and morale, 
this manager was exceedingly effective. Professor Argyris suggests that employees in 
modern industrial organizations tend to have a "built-in" sense of dependence on 
superiors which capable and alert men can turn to advantage. 7 

In the context of the three-skill approach, it seems that this manager was 
able to capitalize on this dependence because he recognized the interrela- 
tionships of all the activities under his control, identified himself with the 
organization, and sublimated the individual interests of his subordinates 
to his (the organization's) interest, set his goals realistically, and showed 
his subordinates how to reach these goals. This would seem to be an excel- 
lent example of a situation in which strong conceptual skill more than 
compensated for a lack of human skill. 

At the Top Level 

Conceptual skill, as indicated in the preceding sections, becomes increas- 
ingly critical in more responsible executive positions where its effects are 
maximized and most easily observed. In fact, recent research findings lead 

7 Executive Leadership (New York: Harper & Bros., 1953); see also "Leadership Pat- 
tern in the Plant," Harvard Business Review, January-February, 1953, p. 63. 


to the conclusion that at the top level of administration this conceptual 
skill becomes the most important ability of all. As Herman W. Steinkraus, 
president of Bridgeport Brass Company, said: 

One of the most important lessons which I learned on this job [the presidency] 
is the importance of coordinating the various departments into an effective team, 
and, secondly, to recognize the shifting emphasis from time to time of the relative 
importance of various departments to the business. 8 

It would appear, then, that at lower levels of administrative responsibil- 
ity, the principal